Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions

SOCIAL SERVICES

Ethnic Minority Groups

Mr. Deakins: asked the Secretary of State for Social Services if he will ask the Social Services Inspectorate to investigate the provision of social services to members of ethnic minority groups.

The Minister for Health (Mr. Kenneth Clarke): The Social Services Inspectorate is continuing the work on this subject already started by the former Social Work Service. We have sponsored research, disseminated the results of that research, and held seminars with staff of social services departments on this subject. The inspectorate's programme of work outside our formal powers will be decided shortly by a joint steering group of representatives of our Department and local authority associations. I will ensure that the needs of ethnic minorities will be discussed when that programme is being decided.

Mr. Deakins: As this is a very important topic, especially for those hon. Members who live in areas with substantial ethnic minority populations with special problems of language, culture and age structure, will the Minister bear in mind the long-term need for a special development group in his Department to co-ordinate progress and research in that area and perhaps provide information and advice to local authorities with these problems?

Mr. Clarke: I am not sure about the hon. Gentleman's proposal, but I will consider the matter. A great deal of research is being carried out, and the results are being disseminated among local authorities. I agree, however, that there is some evidence that ethnic minorities have less access to social services than the bulk of the population. I am sure that everyone would wish to address themselves to that problem.

Mr. Terlezki: I appreciate that we should consider the ethnic minorities, but may I say that, as a member of an ethnic minority, I sincerely hope that we shall not be treated any differently from or better than anyone else?

Mr. Clarke: The main purpose of social services work is to aim at the needs of deprived people, of whatever racial origin. However, we must consider the special problems of particular sections, and we are doing so.

Mr. Janner: When considering the connection between ethnic minorities and social services, will the Minister take the opportunity to pay tribute to the members

of the Asian minority for the way in which they not only look after their own elderly people but serve the elderly of the rest of the community? Without them, we could not keep open the old people's homes in areas such as Leicester.

Mr. Clarke: I quite agree. One reason why the Asian community makes so little call on the work of the social services departments is its excellent record of caring for its own old people in a wide family network. However, even among the Asian community, social patterns are changing. We must ensure that we do not over-rely on that aspect of the Asian community, with the result of neglect.

Mr. Budgen: May I remind my right hon. and learned Friend that the ethnic minorities have already been damaged by the Department of the Environment's policy of reverse discrimination in the granting of various forms of financial aid? If my right hon. and learned Friend's Department now adds a policy of reverse discrimination in the social services, the ethnic minorities will be severely damaged because they will come to be deeply resented by the white majority.

Mr. Clarke: I take my hon. Friend's point. We have to make sure that we give sensible assistance to local authorities to help them to deal with the problems of ethnic minorities. We are researching into the problems of aging and of the under-fives in ethnic communities, and so on, and we are trying to develop a sensible pattern of provision that will not unintentionally damage the interests of those ethnic minorities.

Ms. Harman: Does the right hon. and learned Gentleman recognise that there is some evidence that members of ethnic minority groups do not have equal access to services? Would it not be helpful for local authorities which are attempting to provide services for all those who need them to have a development group set up to advise them? Will the Minister ensure that such a development group, if set up, has enough money to do the job, that it starts soon, and that the Government provide the finance to ensure that the proposals that it makes are carried out?

Mr. Clarke: Access to services must be based on need rather than on statistics, as the hon. Lady will agree. We have sent to all local authorities works such as that by Juliette Cheatham, entitled "Social Work Services for Ethnic Minorities in Britain and the United States". So long as her approach is applied sensibly, we can add to the work of social services departments. We must beware of some of the pressures from so-called anti-racist groups, which probably do more harm than good.

Mr. Meadowcroft: Is it the Minister's opinion that the recruitment of social workers from the ethnic minorities is both culturally and linguistically useful? Will he encourage such recruitment?

Mr. Clarke: Yes, Sir.

Chief Executive Officers

Mr. Hirst: asked the Secretary of State for Social Services how many health authorities have so far appointed chief executive officers in pursuit of the recommendations of the Griffiths committee; and if he will make a statement.

The Secretary of State for Social Services (Mr. Norman Fowler): The appointment of regional general managers is almost complete. Thirteen have been appointed, and the remaining post has been advertised. Good progress is also being made in appointing district general managers. One hundred and sixty-five district health authorities out of a total of 191, and six out of eight special health authorities, have now appointed general managers.

Mr. Hirst: Will my right hon. Friend bear in mind the importance of chief executive officers in the proper and efficient disposition of human and physical resources in the Health Service? Is he satisfied, from the appointments made, that the salary scales are sufficient to attract applicants of the necessary calibre?

Mr. Fowler: Yes, they are. Of the total that I have just given, about 30 have been attracted from outside the Health Service.

Mrs. Renée Short: Is the Secretary of State aware that I have considerable sympathy with general managers who have been appointed, especially those who were in similar posts before the Griffiths report was introduced? They face two major problems: first, the considerable reduction in the number of hospital beds since 1979; and, secondly, the transfer of resources from the Health Service, for which they are responsible, to local authority services for the care in the community policy.

Mr. Fowler: The hon. Lady will agree that improving the management process inside the Health Service will help with those problems, as with all others. The reforms that we have made in that area are some of the most important that have been made during the past 10 years.

Mr. Hickmet: Is my right hon. Friend aware that his Department refused to sanction the appointment of the chief executive to Scunthorpe district, and that that has caused anxiety to the health authority there? Will he look at the matter again? Will he not refuse to sanction such an appointment because the terms and conditions of service, for example, may not be in line with what some of his departmental officials believe is right?

Mr. Fowler: We are recognising the terms of service of that appointment. The Department and I would be much more open to criticism if we rubber-stamped every proposal from health authorities.

Mr. Pavitt: When did the Secretary of State last discuss the Griffiths appointments with Mr. Trevor Clay and the Royal College of Nursing? Has he taken into account the fact that the only paramedical workers in the National Health Service, on whom his Department spent millions of pounds on training management, are nurses? Will he alter his present policy, under which too few nurses are being appointed as managers?

Mr. Fowler: I am entirely happy to talk to Mr. Trevor Clay about that situation. Indeed, I have in the past talked to him about it, but I am content to talk about it again.
I entirely agree with the hon. Gentleman's second point. I should like to see more nurses appearing in management jobs, because the potential of nurses in the Health Service is one of its underused strengths.

Housing Problems

Mr. Sedgemore: asked the Secretary of State for Social Services what assessment he has made of the effect of housing problems on the demand for social services.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Patten): There may be important connections between housing conditions and demands on the personal social services, but research has not so far established and quantified the various relationships.

Mr. Sedgemore: As bad housing is causing outbreaks of dysentery in some parts of the country, and in Hackney is placing such a strain on the health and social services departments that people are dying before their time, will the Minister plead with his right hon. Friend the Secretary of State for the Environment to restore the cuts in the capital housing programme to prevent poisonous and deadly consequences?

Mr. Patten: I am sorry that the hon. Gentleman should speak in such extravagant terms about the connection between dysentery and housing conditions and spread unnecessary alarm. I understand that there is anxiety in Hackney about housing conditions, and that the director of social services has produced an interesting report suggesting some connection between bad housing and the demands on social services. I ask the hon. Gentleman to produce some real results and statistics rather than unfounded general allegations.

Mr. Kennedy: When taking note of the relationship between demands on social services and housing conditions, will the Minister use all the means at his and his right hon. Friend's disposal to ensure that the Department of the Environment ploughs money into the housing programme at a time when the care in the community programme will offload more mentally ill people, in a welcome sense, back into the community? Does he agree that they will need housing and special services to achieve the objective of the programme?

Mr. Patten: Bad and inadequate housing conditions are taken into account when the personal social services element of the grant-related expenditure assessment is calculated.

Secondhand Cookers (Supplementary Benefit)

Mr. Loyden: asked the Secretary of State for Social Services what is the policy of his Department on the provision of secondhand cookers to people on supplementary benefit.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): Single payments of supplementary benefit for cookers are intended to meet the cost of reconditioned items, if these are available, and of new items if they are not.

Mr. Loyden: Is the Minister aware that many of the cookers that people in receipt of social security are compelled to buy because of the price limit are dangerous and inefficient? Is he further aware that recently one of my constituents bought a cooker which subsequently exploded while her four children were in the house? Does he agree that it is about time that this matter was considered? Simply because people are in receipt of social security, they should not be put at risk in that way.

Mr. Whitney: I am aware of the case to which the hon. Gentleman referred, and I have called for a further report from the Garston local office about that incident. On the hon. Gentleman's general question, I should say that the guide set by local officers for such cookers allows for the purchase of safely reconditioned cookers and for proper safety standards in their installation.

Dr. Glyn: Does my hon. Friend agree that the important point is not only that the cooker is properly tested, but that its installation is tested?

Mr. Whitney: Of course, I agree with that. The allowances made under the single payments arrangements allow for such installation.

Mr. Meacher: Will the Minister confirm that single payments for items, such as cookers, for those on supplementary benefit—2 million of which were made last year at an average value of £77 — will be axed under the Government's supplementary benefit review? The Government are already taking back £700 million a year from the unemployed through the taxation of unemployment benefit, have already ended the earnings-related supplement to unemployment benefit, which was worth £16 a week, and are now apparently demanding that the unemployed and those in receipt of supplementary benefit should pay one fifth of their rents and rates. How much further will this vendetta against the unemployed and those on supplementary benefit be taken?

Mr. Whitney: The hon. Gentleman must contain his impatience about the contents of the social security reviews until those reviews are published. I remind him that spending on the social security programme has increased in real terms by 28 per cent. since the Government came to office.

Nottinghamshire

Mr. Ashton: asked the Secretary of State for Social Services if he will make a statement about personal social services in Nottinghamshire.

Mr. Kenneth Clarke: In Nottinghamshire, as with every other local authority having a social services department, the provision of personal social services is a matter for the local authority to decide, taking into account its statutory duties, local circumstances and its priorities.

Mr. Ashton: Exactly. Will the Minister take note of the local election results 10 days ago, when my constituents showed that they were delighted with what the Labour-controlled county council was doing for them? They voted on a basis that would have increased my majority from 3,000 to almost 11,000, and the Labour party would have won back three seats in the city of Nottingham and in Sherwood. Does the Minister accept that if he continues with his plans to remove earnings-related pensions, maternity grants and death grants, that trend will sweep the country and his party will be out of office?

Mr. Clarke: My recollection is that the net loss to the Labour party in Nottinghamshire in the local elections was about six seats. Matters may have been all right at the hon. Gentleman's end of the county, but the Labour party is now almost extinct at my end of the county, and it lost seats in Nottingham and in Gedling. There is no doubt that the social services in Nottinghamshire have greatly

advanced during the past five or six years, despite the allegations of so-called Tory cuts. I hope that the electorate in Nottinghamshire will ensure that they get proper value for money from the increased expenditure that the county council is incurring.

Mr. Lester: Will my right hon. and learned Friend take note of the fact that in constituencies covered by the same county council we actually won seats back from Labour, so presumably the same criteria apply? Will my hon. Friend also take note of the extensive and worthwhile review by the Nottinghamshire social services committee on the position of the mentally ill? There is a great deal of concern that the community care policy, which both he and I support, should be carried out in the most intelligent and sensible way, and that there should be adequate provision by the social services in Nottinghamshire for those who would be better off in community care than in institutions.

Mr. Clarke: I accept what my hon. Friend says. There is considerable commitment to the idea of moving over to a community-based service in Nottinghamshire. It is vital to have the right level of community services in place as the patients are transferred from hospitals, and that will require a high level of co-operation between the health authority and the county council. We have to ensure that that co-operation is forthcoming, regardless of political control, over the next two or three years.

Mr. Alexander: I point out to my right hon. and learned Friend and to the hon. Member for Bassetlaw (Mr. Ashton) that more than three quarters of the spending on social services in Nottinghamshire goes on wages for its employees. I remind him that for one administrato—

Mr. Speaker: Order. The hon. Gentleman should be asking questions of the Minister.

Mr. Alexander: Is my right hon. and learned Friend aware that in Nottinghamshire the social services are spending the money for one administrator per 1,995 people, whereas in the rest of the country the figure is one administrator for nearly 1,000 people more?

Mr. Clarke: The background in Nottinghamshire is not one of cuts. In the past five years, spending on social services has gone up by one quarter over the rise in prices. Nottinghamshire, rather more than most shire counties, has to ensure at least that amount of added service and value to the community. Administrative costs are high there compared with most other Conservative-controlled county councils.

Children in Care

Mr. John Fraser: asked the Secretary of State for Social Services what steps he is taking to reduce the number of children in care.

Mr. John Patten: I am glad that the number of children in local authority care has been decreasing. We support the growing emphasis on preventive measures in child care. It is for local authorities to provide services for children in need, so as to keep them with their families or, in the interests of the children, to provide alternative arrangements for their care.

Mr. Fraser: Will the Minister take steps to amend section 1 of the Child Care Act 1980 to enable local


authorities to spend money on preventing children from going into care as well as spending resources to get them out of care? Secondly, as the number of children in care is often concentrated in the areas of greatest deprivation, will he in future disregard, for rate support grant penalty purposes, the money that local authorities, such as Lambeth and Southwark, spend in keeping children out of care instead of penalising those authorities for spending money in that way?

Mr. Patten: Matters relating to rate support grant penalties are for my right hon. Friend the Secretary of State for the Environment, and not for me or my right hon. Friend the Secretary of State for Social Services. However, the hon. Gentleman raises a serious point, and I know that he means it seriously. The provisions under section 1 of the Child Care Act 1980 are very important. Some councils use them in such a way as to aid preventative measures, and social workers do a very good job by and large in preventing children going into care. We are adding our contribution by doing more to get children out of care. Yesterday, we announced the bringing into force of the provisions of custodianship from 1 December this year, and we are seeking to introduce a new and better system of review of the cases of children in care so that they will be brought out of care as soon as possible and put into a proper family environment where possible.

Mr. Pawsey: Will my hon. Friend confirm that the best place to bring up children is in the family? Will he remind the House of the actions that his Department has taken over the past five years and what it proposes to do in future to ensure that more children remain in the family?

Mr. Patten: Above all else, we want as soon as possible to get out of care as many children as we can from among the 85,000 children in care at the moment—and that is a fall from 100,000 five years ago. That is why we introduced the custodianship provisions of the Children Act 1975. That is why we are seeking, through regular and better reviews of children in care, to get them out of care and into foster homes, homes that provide custodianship or adopted homes, as soon as possible.

Basildon Hospital

Mr. Amess: asked the Secretary of State for Social Services how many people were waiting for urgent operations at Basildon hospital in each of the last five years.

Mr. John Patten: On 31 December 1984 the provisional inpatient waiting list total for all surgical specialties in Basildon hospital was 1,720. The corresponding figures for the years 1980 to 1983 were 2,194, 3,190, 2,100 and 1,891, respectively, the figure for 1982 reflecting the effects of the unfortunate National Health Service industrial action in that year. It is not known centrally how many of these were urgent cases.

Mr. Amess: Will my hon. Friend join me in condemning the alarmist and highly irresponsible remarks of one or two of the Opposition Front Bench spokesmen when they visited Essex, and Basildon in particular, and take this opportunity to put the record straight by praising our local health service?

Mr. Patten: I think that my hon. Friend must be referring to the hon. Members for Holborn and St. Pancras

(Mr. Dobson) and for Peckham (Ms. Harman) who have got hold of a set of totally incorrect and fallacious figures and have used them to knock the National Health Service, in particular the National Health Service in Basildon, which has a splendid record of increased numbers of operations and, best of all, has brought about since 1979 a radical reduction in the number of people on waiting lists for over a month.

Mr. Dobson: As the Minister says that his Department does not hold figures centrally relating to those on urgent waiting lists in Basildon, perhaps he will explain to me why I am in possession of a document headed "Form SBH 203, Dept of Health and Social Security", which records that on 30 September 1984 no fewer than 436 inhabitants of Basildon and Thurrock were awaiting urgent operations and that no fewer than 279 of them had been waiting for more than a month for urgent treatment.

Mr. Patten: I do not know where the hon. Gentleman gets his figures from and in which brown envelopes the figures were delivered to him. What I do know is that the waiting lists in the Basildon area are decreasing, that waiting times are coming down fast and that the standard of health care has improved radically in the last five years.

Privatisation

Mr. Campbell-Savours: asked the Secretary of State for Social Services what estimates he has made about the effect on the budgets of regional health authorities of the introduction of privatisation.

Mr. Kenneth Clarke: None, Sir. All savings derived from competitive tendering will be retained by health authorities and used to improve their services to patients.

Mr. Campbell-Savours: Are not all of those savings being made on the backs of National Health Service workers by cutting their wages? Is it not immoral for the Minister to instruct the West Cumbria district health authority to vary its standing orders in such a way as to secure wage cuts? Is he aware that many members of that district health authority believe that such action is morally indefensible and that it simply cannot be done by means of a resolution?

Mr. Clarke: The savings are being made by better management of the services and by reducing costs to an acceptable level. Failure to do that can only be at the expense of patients and patient services. I understand that West Cumbria has made a commendable proposal, whereby its in-house service will save about £100,000 each year. That is a good bid, which should be compared with what reputable contractors can make in order to examine whether greater savings can be made. Other health authorities are saving almost £500,000, or more, on their services, and that is £500,000 that can be spent extremely well by the health authorities concerned.

Mrs. Jill Knight: Is it not the case that private contractors usually effect savings of about 20 per cent. by means of greater productivity and increased efficiency, which surely must mean that more money is available to be spent on patients? Will my right hon. and learned Friend therefore resist those who seek to let expensive sleeping dogs lie and instead continue to pursue his present policies?

Mr. Clarke: I shall certainly take my hon. Friend's sensible advice. It is pointless deliberately to put up the


cost of cleaning, cooking and laundry at the expense of patient services. Despite all the controversy about a number of contracts, there are hospitals that have found a marked improvement in the standard of those services when they have gone out to good and reputable contractors.

Mr. Tony Lloyd: Is the Minister aware that the North-West regional health authority recently wrote to the Trafford district health authority telling it that if it did not withdraw the fair wages clause in its privatisation contract it would not pass on to it some £70,000 which should have been made available for the elderly and severely mentally infirm and, more importantly, to deal with the drug abuse problem, a programme which the Government have been emphasising? This is clearly a case of blackmail. Will the Minister condemn that and tell the regional health authority to give that money to Trafford, or does he condone such an action?

Mr. Clarke: Off the cuff, I cannot remember the precise details of Trafford's proposed tender documents, but where the so-called fair wages clauses are being insisted upon they tend to involve a combination of pay terms and conditions, sickness benefit, holiday and pension entitlement, trade union rights and so on. That is an absurd attempt by health authorities to intervene in negotiations between private contractors in their areas and their employees. If a district health authority insists on proceeding on a wastrel basis, a regional health authority is entitled to consider whether that health authority should have the difference made up, usually at the expense of other districts in the same region, which carry out the policy sensibly.

Mr. Carter-Jones: Is the Minister aware that there is a disagreement about privatisation in Salford? Will he give a firm undertaking to the House that he will not be involved in any disproportionate cuts in the allocation to Salford as a result of that dispute?

Mr. Clarke: The hon. Gentleman may not be aware that the Salford district health authority has, I am glad to say, resolved to follow the Government's tendering policy. I am sure that the patients of Salford and the service there will benefit as a result.

Mr. Dickens: Are there not many hidden benefits from privatisation within the NHS? Is it not amazing how hospitals all over Britain have rushed to put their house in order in their laundries, kitchens, transport services and other areas because the very mention of privatisation has crystallised their thinking about efficiency within the Health Service in their desire to prove that they are as competitive as private enterprise, which, of course, they are not?

Mr. Clarke: The benefits are not that hidden. So far, savings of about £13 million have resulted from the tendering exercise, and that is being spent on patient services. But the process has only just begun and we expect substantial benefits to come to the NHS when all authorities have made proper progress in implementing the policy.

Mr. Meadowcroft: What co-ordination is there in the Department of Health and Social Security to ascertain the transfer costs of low-paid workers from one part of the DHSS to another? Is it not the case that there is no saving

whatever simply because the cost of low-paid workers is transferred under social security either through family income supplement or unemployment benefit?

Mr. Clarke: A standard pattern is for most employees who already work for the in-house service to be taken on as employees by the contractor who wins the contract if it goes outside. If the hon. Gentleman is trying to say that somehow family income supplement claims wipe out the benefit to the Health Service, his mathematics are way out.

Mr. Meacher: Is the Minister aware that, whatever profits privatisation is producing, it is also worsening standards of care in the NHS? Is he aware that a hip operation on a woman in her sixties had to be cancelled last month at Addenbrooke's, Cambridge, when blood and bone was found on the floor because the private contractors, Office Cleaning Services, failed to clean the theatre after the previous day's operation, and that such examples are frequent? How does he justify the fact that the level of cross-infection in hospitals has now reached the record level of 9 per cent., which it has never been anywhere near before, and is undoubtedly due partly to the squalid standards of much privatised cleaning?

Mr. Clarke: A great deal of scandalous propaganda is going on in support of vested interests, largely in the trade union labour movement, which wishes to keep cleaning costs up. The example that the hon. Gentleman quotes is entirely untrue in the way that he has given it. The blood and bone dust found at Addenbrooke's was found m a part of the hospital not included in the specifications of the outside cleaners. A great deal has been made of it, when in fact the fault cannot be laid at the door of the outside contractors. There is no intrinsic reason why the service should be better whether the employees are employed in-house or by a contractor. It does not make any difference to the standard of service whether they are in the union or not. What matters is good management to produce a cost-effective service of the right standards. Many health authorities find it easier to get the standards of outside contractors improved than to cope with the low standards of some in-house cleaners, when bad management over the years has allowed standards to decline.

Nursery School Places

Mr. Barron: asked the Secretary of State for Social Services what plans he has to increase the number of places available in public sector day nurseries for children aged under five years.

Mr. John Patten: This is a matter for local authorities.

Mr. Barron: Is it not right to say that the Minister's own Department feels it necessary to put £2 million a year until 1986 into voluntary bodies, while at the same time the Secretary of State for the Environment is attacking the public sector and it is very likely that there will be no increase in day nursery places, either full or part-time, if he does not stop this attack on the public sector by attacking the rate support grant?

Mr. Patten: The hon. Gentleman's question presupposes that most people think that day nurseries are the best form of help and care for under-fives. That is not the case with a great many authorities. Indeed, the Select Committee on Social Services said
it is expensive and unwieldy to provide unlimited facilities of day care.


What we need is a mixed economy of care for the under-fives, including an increased number of places with child minders and an increased number of places in play groups. All of this must be supported and underpinned by the excellent under-fives initiative to which the hon. Gentleman has already referred.

Mr. Jessel: Are not day nurseries of great value in giving children a sense of security? Is it not an unkind and needless act for the Richmond upon Thames borough council to threaten to throw out 38 Vietnamese boat orphans at present in the care of the Save the Children fund at Hampton Court house? Will my hon. Friend repeat the offer that he has already made, in view of the fact that the sale of the house has been advertised in the latest number of Country Life, to provide not only for the maintenance of the children but for the payment of a fair rent to the borough council?

Mr. Patten: I am deeply concerned about the welfare of the children. There have been suggestions that Richmond upon Thames borough council, which I understand is under Liberal party control, is more interested in making money than in the welfare of the children. I do not know whether these allegations are true, but Liberal-controlled Richmond upon Thames borough council has a fine opportunity now to demonstrate that it does have those children's interests at heart.

Supplementary Benefit (Review)

Dr. McDonald: asked the Secretary of State for Social Services when he now expects to announce the results of his review of supplementary benefit; and if he will make a statement.

Mr. Roy Hughes: asked the Secretary of State for Social Services if the review of the social security system has now been completed; and if he will make a statement.

Mr. Redmond: asked the Secretary of State for Social Services when he now expects to announce the results of his review of housing benefit; and if he will make a statement.

Mr. Allan Roberts: asked the Secretary of State for Social Services if he will now publish the evidence submitted to his review committees; and if he will make a statement.

Mr. Fowler: The Government's proposals on social security will be published in a Green Paper after Whitsun. Over 4,500 written pieces of evidence were received. Those who submitted evidence are free to publish it and many have done so.

Dr. McDonald: Does the Secretary of State agree that the phasing out of the state earnings-related pension scheme will mean that more pensioners in the future will have to rely on supplementary benefit and that both workers and employers will have to pay higher national insurance contributions for workers to get far less by way of pensions in the future? Does he further agree that the Prime Minister has moved on from being the milk snatcher to being the pension snatcher?

Mr. Fowler: No, I think that that is a pretty silly statement, even by the hon. Lady's standards. The House will have to wait for the proposals. I am entirely content to be judged on the proposals in the Green Paper, but I am

not prepared to be judged on half-baked scare stories put forward by the Opposition. Whatever changes are made, the proposals do not affect the basic pensions, and our position on that is clear. The basic pension has increased by 84 per cent. compared to a 77 per cent. rise in prices, and we remain absolutely committed to the pensioners of the country.

Mr. Hughes: Is not the much-heralded campaign to scrap the earnings-related pension scheme yet another attempt to cut public expenditure so as to give further tax handouts to the rich, irrespective of the fact that 11 million contributors could lose their pension rights and that many thousands more could be living in poverty at the turn of the century?

Mr. Fowler: I certainly do not accept the last part of the hon. Gentleman's comments, and nor will he when he sees the proposals. It would be utterly irresponsible of any Government not to look forward and make some judgment about the costs that the country will have to meet.

Mr. Roberts: Instead of devising ways to take money from those in our community least able to support themselves and instead of devising ways to scrap housing benefits for millions of people, why does the Minister not consider in his review ways to help those in most need? For example, why does he not extend to the elderly living in public sector housing the right to live rent-free in the way that owner-occupiers, having received, quite rightly, income tax relief on their mortgages, live mortgage-free after 25 or 30 years of subsidy?

Mr. Fowler: One of the aims of the social security review—and I think that there is no difference between the two sides on this—is to have an overall look at social security provision. Another aim is to seek to simplify the system, and again I think that there is a consensus on that. A third aim is to make the best use of available resources and to channel them to those most in need. That is the right way to proceed, which is why the Government set up the review.

Dr. Mawhinney: Does my right hon. Friend accept that many of us are eagerly looking forward to his review, in the confident expectation that it will fully protect the standard of living of those of our fellow citizens who are genuinely in need?

Mr. Fowler: Yes, and that will be one of the standards which my hon. Friend and the country will want to apply to the proposals when they are set out. There appears to be total agreement that the social security system must be reviewed. The Government are doing that, while other Governments have funked it.

Mr. Eggar: Have not our society and the needs of our citizens changed during the past 40 years? Would we not be failing in our duty if we did not take this opportunity to review the system?

Mr. Fowler: My hon. Friend is absolutely right. It is clear that need, and the definition of need, have also changed. One of the areas that gives me most cause for concern is that of families with children, where there is undoubted need. We must have a modern social security system, which is why the Government are putting forward a Green Paper. The public will then know what the issues are.

Mrs. Beckett: Since extending private pension cover to those covered by the state earnings-related pension scheme seems likely to cost about £3 million to £6 million in tax reliefs alone, can the Secretary of State tell us how soon we can expect the Chancellor to renege on his commitment not to change tax reliefs for occupational pensions, as thoroughly as the Secretary of State and the Prime Minister have reneged on their commitments to pensioners?

Mr. Fowler: There are no plans to change the tax relief on occupational pensions. The biggest deceit is to make the promises that the hon. Member for Oldham, West (Mr. Meacher) does, when he knows perfectly well that they cannot be fulfilled. The biggest swindle of pensioners was carried out in 1976 by the last Labour Government when they changed the basis of uprating and saved £1,200 million. That is what the Opposition did when they were in government.

Mr. Forman: When announcing his reforms in his statement after the recess, will my right hon. Friend be careful to leave open the possibility of moving towards an integrated tax benefit system as one of the longer term consequences of his proposals?

Mr. Fowler: It is an important aspect of the study, and the debate which will follow it, to consider the relationship between the social security system and the tax system. I am conscious of that, as is my right hon. Friend the Chancellor.

Private Residential Care

Mr. Boyes: asked the Secretary of State for Social Services when he will announce the membership of the team to review private residential care for the elderly.

Ms. Harman: asked the Secretary of State for Social Services what has been the percentage increase from 1979 to the latest available date of the number of private, not voluntary, residential care homes for the elderly.

Mr. John Patten: I assume the hon. Member for Houghton and Washington (Mr. Boyes) is referring to the proposal that has been put forward by the Social Care Association for a general review of residential care, which would not be confined to the private sector nor to the care of the elderly alone. We are currently consulting the local authority associations about this proposal, and I shall be meeting them later this week. As far as the number of private homes for elderly and disabled people is concerned, these have increased by 99·3 per cent. between 31 March 1979 and 31 March 1984.

Mr. Boyes: During the discussions, will the Minister take into consideration the fact that in the newly introduced regulations on board and lodging for people living in the voluntary sector the allowance is far too low? I understand that the Leonard Cheshire Homes, for example, have to raise over £1 million to carry on their services. Is not this attack on the elderly and disabled another example of the Government's hit and run philosophy?

Mr. Patten: It is no attack whatever on the elderly and disabled. My hon. Friend the Minister for Social Security has the issue under active consideration.

Ms. Harman: Is not the boom in private profit-making old people's homes being largely subsidised by the Department of Health and Social Security? Would not public money be better spent on allowing local councils to provide meals on wheels and home helps to enable people to stay in their own homes rather than on subsidising institutionalisation in private homes?

Mr. Patten: The private sector has an important part to play. We are also concerned about the public sector. The hon. Lady will be aware from the position in her own constituency, at Nye Bevan lodge old people's home. that there seems to be a substantial cover-up by Southwark borough council, which is not making information available to Opposition members of its social services committee. I believe that the hon. Lady is very keen on the disclosure of information. I hope that she will join me in pressing Southwark council to make all the information available.

PRIME MINISTER

Engagements

Dr. McDonald: asked the Prime Minister if she will list her official engagements for Tuesday 14 May.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others, including one with the President of the Cameroon. In addition to my duties in the House I shall be having further meetings later today. This evening I hope to have an audience of Her Majesty the Queen.

Dr. McDonald: Does the Prime Minister repudiate the views of ex-Cabinet Ministers in her own party that the Government should intervene directly in industry to create jobs and that the Chancellor's cherished tax cuts are becoming a victim of his own economic strategy"

The Prime Minister: As the hon. Lady is aware, the Chancellor's tax cuts, indicated in the Budget recently, will take effect this month. I do not think that the hon. Lady will oppose them. With regard to what has been said by former members of my Cabinet, I heartily agree with the comments on the Labour party:
Labour is riddled with anti-democratic elements and saddled with policy commitments that would undo most of the good of the past six years.
I am grateful for the support of my right hon. Friend who made that comment.

Mr. Moynihan: In view of the succession of Conservative swings in the last three council by-elections in Lewisham, East, culminating in the outstanding victory last Thursday in a once safe Labour ward, does my right hon. Friend agree that their Lordships would be wise to listen to the views of those in Lewisham rather than pay attention to the redundant and ill-informed propaganda above County Hall, behind the far Left of this Chamber?

The Prime Minister: I heartily congratulate my hon. Friend on the excellent election result in Lewisham. It is an absolute confirmation of the wisdom of rate capping.

Mr. Kinnock: As we grieve with those who were most directly affected by the tragedy at Valley Parade on Saturday, may I ask the Prime Minister two questions of immediate relevance, on both of which immediate reassurance is required? First, will the Government ensure


that none of the bereaved or those who suffered grievous injury on Saturday will have to endure additional suffering if it becomes evident that Bradford City Association Football Club does not have sufficient insurance cover to meet all legitimate claims? Secondly, are the Government prepared to use part of the large revenues which they derive direct from football for the purpose of immediately undertaking an extensive programme of improvements to safety at public sports grounds?

The Prime Minister: The answer to the first part of the right hon. Gentleman's supplementary question is that it would be best if he allowed us time to look into all the financial matters first to see exactly how much is covered by insurance. Various disaster funds have been started. The answer to the second part is that I shall be seeing the chairman of the Football Trust tomorrow. The right hon. Gentleman will be aware that the situation is complicated, in that £7 million a year goes to the Football Trust from 20 per cent. of the turnover from "Spot the Ball" competitions. Half of that goes to the Football Ground Improvement Trust for ground improvements at Football League clubs. Last year, 1984, the Football Ground Improvement Trust accumulated £3·3 million in its bank balance because there had been insufficient extra demand from league clubs for improvements. That money was distributed, on the initiative of the Football League, as retrospective grant to those clubs that had already received grants from the trust. I have been inquiring into the finances. It would be best if we made a very thorough inquiry before jumping to any conclusions.

Mr. Kinnock: I trust that the inquiries will not merely be thorough — as I would expect them to be, and I certainly support the right hon. Lady's activity in that respect—but will also be urgent, because, both in terms of those who are now in deep anxiety and in terms of the implications for crowd safety, it is clearly necessary that effective action is taken as quickly as possible.

The Prime Minister: As I told the right hon. Gentleman, I shall be seeing Lord Aberdare tomorrow. I had intended to see him long before the tragedy last Saturday; that makes it all the more urgent.

Mr. Lawrence: Does my right hon. Friend agree that the remarks attributed in the Falklands to Labour's Front Bench spokesman on foreign affairs will have left the Falkland Islanders in no doubt that Labour has not the faintest interest in protecting their rights?

The Prime Minister: Yes, Mr. Speaker —[Interruption.] Those remarks must have been deeply wounding and we on these Benches reject them absolutely.

Mrs. Peacock: asked the Prime Minister if she will list her official engagements for Tuesday 14 May.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mrs. Peacock: Will my right hon. Friend today extend congratulations to those involved in the building of the Falkland Islands airport? Nowhere else in the world has a project of this nature been achieved under such difficult conditions in such a short time. Does my right hon. Friend agree that it is evidence of British industry and the British work force at their very best?

The Prime Minister: Yes, I gladly join my hon. Friend in congratulating all of those concerned in the building of

the airstrip—[Interruption] —and I should have thought that Labour Members would have been more generous-minded and would have wished to congratulate the work force, which achieved the building of that airstrip in 16 months from the date of its being started — a truly brilliant achievement.

Mr. Dixon: asked the Prime Minister if she will list her official engagements for Tuesday 14 May.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Dixon: During the right hon. Lady's busy day, will she reflect on the fact that since she first came to power in 1979 the last shiprepair yard in my constituency has closed, the last shipbuilding yard in my constituency has been put in mothballs, the last pit in my constituency has been closed, the last steelworks in my constituency is to be phased out at the end of this year and that MacGregor has just announced that the Whitburn workshops in my constituency will be closed?—[Interruption.] If some Conservative Members would stop shedding crocodile tears about unemployment, we might get somewhere.
Is the Prime Minister aware that in my constituency one in three men are unemployed and that of those 40 per cent. have been unemployed for more than 12 months? [Interruption.] This is no laughing matter and if some Conservative Members tasted unemployment, they would not be so niggly and sniggly about it. Is the right hon. Lady further aware—

Mr. Speaker: Order. The hon. Member is taking a long time over his supplementary question.

Mr. Dixon: Some of the hooligans on the Government Benches should be called to order, Mr. Speaker, rather than me, because we are talking about men and women who are anxious to earn a living. Will the Prime Minister speak to the Secretary of State for the Environment—bearing in mind the devastation that Conservative policies have caused to my area—and tell him to redesignate the area from a programme authority to a partnership authority?

The Prime Minister: I shall of course speak to my right hon. Friend. May I point out to the hon. Gentleman that he knows some of the answers to some of the problems? In shipbuilding, there is a surplus of world capacity. We cannot go on keeping a surplus capacity here. We cannot compete, even with the generous subsidies that have been given to shipbuilding. In steel, he will be aware that his Government also had to close surplus steel plants. As for coal, he will be aware that if we want a successful coal industry we must concentrate on the pits of the future. No Government have put greater investment into the coal industry than this one.

Mr. Conway: Will my right hon. Friend take time today to study the latest CBI report about a 50 per cent. reduction in the number of strikes? Will she consider ways of promoting such an achievement by this Administration, in order to encourage not so much the Centre Forward but those of us who play left back?

The Prime Minister: I saw the report. I believe that it is partly due to the legislation passed by this Government to give each and every person in trade unions the right to a secret ballot, first, to elect their own officers and,


secondly, to reach a decision about whether there should be a strike if the union is to keep its protection and immunities.

Mr. Steel: Does the Prime Minister recall telling the House a fortnight ago in answer to a question from me that the matter of planning permission for the Palumbo tower was not for her but for the Secretary of State for the Environment? If that is the case, will she confirm press reports that she was round at the Department of the Environment the next morning looking at the planning application? If so, what was she doing there, and what is her attitude to the application?

The Prime Minister: Yes, Mr. Speaker. That visit had been arranged long before the right hon. Gentleman asked his question. Of course 1 went round and looked at the model. The decision was, and is, for my right hon. Friend the Secretary of State for the Environment, and I hope that he will be making it shortly. I hope that the right hon. Gentleman realises that it is not unknown for a Prime Minister to visit a Department to see exactly what the problem is.

Mr. Gerald Howarth: Has my right hon. Friend noted the apparent Damascene conversion of the Labour party with its decision to allow council house tenants to buy their own homes? Does she agree that, while there may be greater joy in Heaven over the one sinner that repenteth, council house tenants should remember that it was the Tory party which gave them that right?

The Prime Minister: Yes, Mr. Speaker. But I note that the Labour party's conversion is far from complete. I understand that it has left it to Left-wing authorities to opt out. I can, therefore, hardly say that the Labour party has been converted. I should be more likely to say that it was shown in its true colours when it fought the Bill line by line during its passage through the House. Those who own their council houses owe that to the Government's courage and determination.

Mr. McKay: asked the Prime Minister if she will list her official engagements for Tuesday 14 May 1985.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. McKay: Will the Prime Minister note that tomorrow is the launch of the coalfields community campaign? [HON. MEMBERS: "What is that?"] I regret that that remark shows the opposition's ignorance. [Interruption.] It shows the ignorance of Conservative Members about organisations, led by many eminent people in the House and outside, representing over 11 million people who are worried by the Government's policies on colliery closures, which have raised unemployment figures to 18 and 20 per cent. in those areas. Will she send a message of congratulations to that campaign and insist that collieries do not close, except for economic reasons, unless there are replacement jobs?

The Prime Minister: No, Mr. Speaker. The hon. Gentleman is fully aware that he is asking for management to opt out of its responsibilities to manage and for unlimited amounts of subsidy from the taxpayer. He is well aware that this Government have poured more investment into the coal mines of the future than any other. He is also aware that there were more colliery closures under Labour than under the Conservatives.

Mr. Colvin: With regard to the earlier question from the hon. Member for Jarrow (Mr. Dixon), will my right hon. Friend find time today to refresh her memory on what was known as the King's Lynn scheme whereby 100 jobs and 100 houses were offered to unemployed workers in Jarrow? Does she recall that only 36 people applied for those jobs and that, at the end of one year, only 15 remained in King's Lynn? Will my right hon. Friend consider getting in touch with my right hon. Friend the Secretary of State for Trade and Industry and asking him to send a load of bikes to Jarrow?

The Prime Minister: I think that we would all wish that we could bring more jobs to people. As my hon. Friend knows, that can be done only if more people are prepared to start up businesses and more goods are sold in this country and overseas. That means good design and good salesmanship. There is no other answer.

Mr. Frank Cook: asked the Prime Minister if she will list her official engagements for Tuesday 14 May.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Cook: Will the Prime Minister take time this afternoon to ponder on the fact that, during Prime Minister's Question Time last Thursday — [HON. MEMBERS: "Reading".] I am not reading. I am prepared to let hon. Members see the document. Will the right hon. Lady ponder on the fact that, in response to a question from her colleague the hon. Member for Langbaurgh (Mr. Holt), she allowed herself to be misled, that in doing so she misled the House and that, in her anxiety to malign the honourable and dedicated teaching profession, she misrepresented the facts relating to the Endeavour school in Middlesbrough? Will the right hon. Lady agree this afternoon to accept a copy of a letter setting out the truth, which was written by a constituent of mine who is a member of the staff at that school? Having had that letter checked, will she have the decency and courage to return to the Chamber and admit that, yet again, she has got it wrong and apologise not only to the teaching profession but to the staff of a very dedicated establishment?

The Prime Minister: Of course I will receive that letter. I believe that the hon. Gentleman is referring to a question about a school where supervision at a meal times had been withdrawn. I understood that that school was in the constituency of my hon. Friend the Member for Langbaurgh (Mr. Holt) and that he was well aware of the matter. If I am wrong, I apologise. But I wish to see the facts.

Mr. Bell: On a point of order Mr. Speaker. We often consider the question of the Prime Minister's accountability to the House of Commons. Question Time is a treasured opportunity for Back Benchers to render that accountability real. Is it not important, Mr. Speaker, to remind the House that questions to the Prime Minister should be related to her executive responsibility and not to statements made by members of the Labour party and to matters that have nothing to do with her executive responsibility?

Mr. Speaker: I think that I was in error in not pulling up the hon. and learned Member for Burton (Mr. Lawrence). Of course questions to the Prime Minister must be about her responsibility.

Mr. Skinner: On a point of order, Mr. Speaker. Did you receive any nods or winks during Prime Minister's Question Time from members of the Centre Forward team? It has come to my notice that one of the members of the Centre Forward team—the right hon. Member for Chesham and Amersham (Sir I. Gilmour) — looks as though he was tripped up by a dirty centre half. His arm is in plaster.

Mr. Speaker: I am sure that we all commiserate with the right hon. Member for Chesham and Amersham (Sir I. Gilmour). I do not always read the newspapers, so I do not know what the hon. Member for Bolsover (Mr. Skinner) is talking about.

Mr. Tom Clarke: On a point of order, Mr. Speaker, arising from questions to the Prime Minister. You will recall that the hon. and learned Member for Burton (Mr. Lawrence) asked a question that referred to my hon. Friend

the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes). I ask you, in the interests of fair play, to ensure that my hon. Friend is given the opportunity to give his account of recent events, in view of the fact that not all statements in recent months and years on the Falklands have been shown to be entirely accurate.

Mr. Speaker: The hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) will have to seek an opportunity to do so.

Mr. Bill Walker: On a point of order, Mr. Speaker. May I draw your attention to the fact that the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) had the opportunity on the radio this morning to explain to the nation what he said in the Falklands? I think that when one reads the transcript one will—

Mr. Speaker: Order. That is an extension of Question Time. We have already dealt with that matter.

Rating Revaluation (Scotland)

The Secretary of State for Scotland (Mr. George Younger): With permission, Mr. Speaker, I should like to make a statement about the Government's proposals for legislation to give some relief to certain ratepayers in Scotland who have in 1985–86 seen the rateable values of their property increase very steeply.
In the August 1983 White Paper on rating reform in Scotland — Cmnd. 9018 — the Government reaffirmed our earlier decision to have a full Scottish revaluation in 1985. That was approved by all parties in Scotland and by the Convention of Scottish Local Authorities, which considered it important that the valuation rolls should reflect fairer and more up-to-date values.
As information became available from assessors about the likely general effect of revaluation, I took various steps to offset the more extreme effects. In particular, I have twice increased the domestic element of the rate support grant—by a total of some £88 million—so that it now amounts to 8p in every £1 rateable value for domestic ratepayers: and, because of the benefits secured by industry overall, I reduced the percentage of industrial derating from 50 per cent. to 40 per cent.
Nevertheless it is all too clear that there are still many domestic ratepayers whose valuation increases have been particularly steep and who still face very substantial increases in their actual rate bills. Furthermore, in the commercial sector, though the average effect of revaluation has been neutral, there are significant numbers of businesses facing very severe increases. No small business man, however enterprising, could ever have been expected to plan for a rates demand like some of the hugely increased bills that have now arrived.
The Government have therefore decided to introduce a scheme to help ratepayers faced with very high increases in their valuations. They will be given a new statutory right to claim 100 per cent. relief in respect of that part of their 1985–86 rates bill related to all of their new valuation which is in excess of three times their 1984–85 valuation. That will be subject to a limit to the total relief payment in the case of any particular subject, to ensure that maximum help is targeted towards the smaller businesses. The right will extend to domestic and commercial ratepayers alike; it will not extend to property occupied by local authorities and the Crown; public undertakings valued by statutory formula; and manufacturing industry and freight-transport subjects. The scheme will be administered by rating authorities, to which I shall reimburse the full cost of the payments. The new relief will have no effect on statutory rights of appeal or on other rights and duties, though where an appeal is successful, the amount of relief will fall to be adjusted accordingly.
The new relief is intended to ease the immediate burden arising from the high valuation increases that took effect at 1 April and will apply in the year 1985–86. I shall consider in due course whether there is a case for any special relief in 1986–87. I estimate that the relief will probably cost at least £50 million. That will be new money from the taxpayer.
A Bill providing for the new relief will be published as soon as possible. I hope that hon. Members opposite will, as the hon. Member for Glasgow, Garscadden (Mr. Dewar) has already said, give support to us in our

endeavours to bring the scheme into force at the earliest possible moment. There is no need for any ratepayer who thinks that he will benefit from the scheme to act until the Bill has been brought into operation.

Mr. Donald Dewar: Of course we welcome any decision by the Government that will help ratepayers in Scotland. It is—if I may say so—remarkable how fear concentrates the mind. A Secretary of State, who has repeatedly said, "Not a penny more," is now scrambling for safety. We do not complain about any retreat by the Government. We would welcome retreat in a number of other fields. However, it is a sad spectacle to see Scottish Office Ministers in incoherent and confused disarray, being driven from pillar to post and desperately claiming as triumphs policies that they never planned and which have been imposed upon them by public opinion and the wrath of their own supporters. The pass has been dragged from the right hon. Gentleman, and the concession made only because necessity drives.
The Secretary of State's statement was ingenious. No hint was given to the faithful in Perth that the scheme would extend beyond the commercial sector. The scheme looks much less generous to the commercial sector once the whole domestic sector has been included.
What percentage of the £50 million will go to commercial, and what to domestic ratepayers? We will want the limit figure to be designed to make sure that the lion's share does not go to supermarkets and national chains but helps those who are really at risk—those under pressure. Will the Bill settle such matters? Will the Bill contain details, or is it to be an enabling Bill and will we have to wait for an order?
The Opposition will wish carefully to analyse the effect on the domestic sector. I suspect that there will be little cheer for those at the bottom end of the housing market and the vast majority of council tenants. We will wish to take a long, hard look to make sure that a disproportionate share does not go to Eastwood, Pollokshields, Newton Mearns and Ayr. We recognise the difficulties and the tottering prestige of many of the Secretary of State's hon. Friends in their own areas, but there is a limit to the distortion of the pay-out that will be acceptable to us.
Will there be a cut-off on the amount of relief to an individual householder, analogous to the one that the Secretary of State has announced for commercial ratepayers? How does he estimate the impact of this announcement on the average increase in the domestic rates bill in Scotland? I am sure that he has made the calculation.
I welcome the fact that this is to be new money and that the right hon. Gentleman has assured us that the Scottish Office budget will not be raided in any way to meet the bills, but it is essential that guarantees be given that the help will be extended throughout the remainder of the quinquennium. It would be fraudulent to offer help in 1985–86 but leave those who receive it now to bear the full impact in subsequent years. That would confirm the feeling that the whole exercise was a squalid manoeuvre designed to defuse the explosion of rage at the Tory party conference.
It may be unfair to mention the somewhat unpleasant subject of the Chancellor of the Exchequer. However, we cannot ignore the Chancellor's harsh arrogance at Perth, when he is reported as having said:
no more money is likely next year…he would not be in the same unaccountably open-handed and generous mood.


I hope that the Secretary of State accepts that will not do. During the passage of the Bill we will want to be given an undertaking that at least in principle—we will not hold him to exactly the same level—this help will continue to be available throughout the rest of the quinquennium.
If we are satisfied on those matters, we will of course help the Bill through. We want all the cash that we can get from the skinflint Treasury that landed us in this mess and ought to foot the bill for it.
The crisis is not over. The Secretary of State has not muddled through with this announcement. The root of the trouble has been not just revaluation but the constant and vindictive assault on local government finance for the past three or four years that has deprived local authorities in Scotland, on our calculations, of about £1,000 million since 1980–81. If the Secretary of State would reverse that policy, he would be doing the greatest favour to ratepayers in every sector and would give the system a breathing space that would allow us all to look for the considered and effective method of reform that the Opposition certainly want.

Mr. Younger: The last part of the statement of the hon. Member for Glasgow, Garscadden (Mr. Dewar) is wholly incorrect. If I did what he recommended at the end of his rerbarks, councils would merely spend even more and ratepayers would face even bigger rate increases. It was an extraordinarily ineffective smokescreen from an hon. Gentleman who has always supported the principle of five-year revaluations, who pressed for the revaluation to be this year and not postponed further, and who knows perfectly well that the level of the increases proposed are the job of the assessor, and not in any sense of anyone else. His criticisms of that are wholly without foundation, and he knows it.
As for the hon. Gentleman's suggestion of a retreat, this is the normal statutory process, which he fully supports. The Government have not merely produced assistance first for domestic ratepayers and now for commercial ratepayers, but produced assistance which is vastly greater than anything for which the hon. Gentleman asked and, indeed, than the maximum demanded—the Liberal party asked for the maximum, which was about £4 million to £5 million. We are providing £50 million, and that shows who in Scotland cares about helping ratepayers. The hon. Gentleman should recognise that.
Regarding the hon. Gentleman's question about the sum, the difference between £40 million, which I mentioned earlier, and £50 million, which I gave today, is accounted for by the fact that the latter includes domestic ratepayers. The previous figure referred only to commercial ratepayers, as the hon. Gentleman will now realise.
I have still to collect the fullest information about the limit. I have in mind a figure of the order of £10,000, up to which any one subject would benefit from the help. The hon. Gentleman must wait and see the terms of the Bill when it is published. The Bill will arrange for the principle of the matter and regulations will spell out the details in full, and they will obviously be debated.

Sir Hector Monro: I gave my right hon. Friends the Prime Minister and the Secretary of State for Scotland my warmest congratulations on what they achieved for domestic and commercial ratepayers. The

assistance is more than was asked for by the Labour Opposition, the alliance and the National Federation of Self-Employed and Small Businesses.
Now that my right hon. Friend has made that great achievement, will he put tremendous pressure on high-spending authorities, and will he give the money that he saves from them to prudent authorities, which need the resources for essential services?

Mr. Younger: I appreciate my hon. Friend's last point, and I shall bear it in mind. Regarding high spending, my hon. Friend knows, as I do, that of the average increases which ratepayers face, one third is caused by the rate support grant or inflation factor, and two-thirds by the overspending of irresponsible authorities. Ratepayers in Scotland will fully realise that truth, and will be interested to see that the Opposition's attitude to the package is not in support of ratepayers' interests.

Mr. Malcolm Bruce: It is wonderful to hear the Secretary of State lecturing the House on how much money he has managed to find, when he has often told us how difficult it is to find money. Obviously, we welcome the fact that he has responded to pressure from all sides.
Does the right hon. Gentleman recognise that a one-off settlement this year will not be enough? Does he recognise that, if all commercial ratepayers received relief this year, he would merely be delaying the execution of many small businesses? As he has found this sum to meet the rate crisis, cannot he now come forward with new money to meet the education crisis, or is that simply a sign of the rather warped priorities of a Government threatened with extinction in Scotland?
The Prime Minister and the Secretary of State have promised to reform, and indeed to abolish, the rating system. How many more times will they make that promise before they get round to doing it? Can we expect legislation in this Parliament to obviate the need for an emergency package simply to save the Secretary of State's skin rather than to deal with the underlying problem, which was caused by the Government's cuts in rate support grant and in funding to local authorities?

Mr. Younger: I admire the hon. Gentleman's courage in speaking on this issue when, for the past couple of months, he has purported to be campaigning for commercial ratepayers, but got all his figures hopelessly and completely wrong from the start. He was only £35 million out on what is needed to help commercial ratepayers in Scotland. Extra help for next year will be considered at the time of next year's general settlement.
As for the teachers, I do not know where the hon. Gentleman has been for the past few months, but since December there has been an offer on the table from me not only to consider a package from the teachers but to find more money from the Scottish block to help them. The only problem is that they have not taken up that offer.

Lord James Douglas-Hamilton: Will my right hon. Friend give top priority to the reform of the rating system within this Parliament? Does he accept that his statement will be greatly welcomed by many thousands of small business men, who will owe their survival in Scotland to his decision? Is not the figure that he announced much more realistic than the one tenth of that figure suggested in the House a few days ago by the hon. Member for Gordon (Mr. Bruce)?

Mr. Younger: I am grateful to my hon. Friend, and I can confirm that the ministerial committee, on which my hon. Friend the Minister responsible for home affairs and the environment sits, is considering local government finance with a view to producing proposals for change. As to helping commercial ratepayers, whereas many people have talked about it for months, the Government have acted, and commercial ratepayers will be grateful for that.

Mr. Bruce Milian: While we obviously welcome this further attempt by the Secretary of State to extricate himself from a mess of his own making, may I tell him that, if he believes that it will resolve the rating crisis, he will soon be disabused of that notion? The extra £10 million for domestic ratepayers will reduce the average increase in their bills this year from 21 per cent. to about 20 per cent. If the right hon. Gentleman believes that that will satisfy domestic ratepayers, he could not be more out of touch with the feelings of ratepayers in Scotland on this matter. In any case, why does he not tell us the whole story? The crisis relates not only to revaluation but to successive cuts in rate support grant. Is it not utter hypocrisy to talk about the £50 million being new money when we know that, before the summer recess, the Secretary of State will impose penalties of £100 million on Scottish local authorities? He will be imposing penalties twice as great as the sum that he announced this afternoon. Is it not complete humbug to talk about this being new money?

Mr. Younger: I do not know whether the right hon. Gentleman has done a U-turn. If he is with the rest of his party, he solidly supports revaluation, believes that it should take place every five years, and believed that it should take place this year. I hope that that is now clearly on the record. He cannot shelter behind the fact that it was someone else's decision; he supports it. The objective of the help for commercial and domestic ratepayers is to give 100 per cent. help, subject to a cut-off, to those with the biggest increases. It will do that, and they will be grateful for it. I admire the right hon. Gentleman's courage in mentioning cuts in the rate support grant. Only he ever cut it by 4 per cent. in one year.

Mr. Bill Walker: The ratepayers in my constituency will be relieved that the Secretary of State acted so quickly. The ratepayers in commercial premises in Angus will be especially relieved, because their rates would have exceeded greatly those in other areas. Does my right hon. Friend agree that this is another example of the Government acting quickly to reverse problems that were created by Labour legislation, and that that has been the record of the Government during this Parliament? The humbug is on the Opposition Benches.

Mr. Younger: My hon. Friend is perfectly right. He is particularly concerned about the ratepayers in Angus, about whom he has been in touch with me many times over the past few weeks. I am glad that he has confirmed that this measure will be a help to those ratepayers. I am also glad that my hon. Friend mentioned speed, because at every point in its process, which was supported by the Opposition parties, all of whom agreed that there should be revaluation now, as soon as the Government have seen the information about what the scale of the increase will be, we have responded with extra help, first for domestic and then for commercial ratepayers. It is only the

Opposition parties, with their blinkered attitude to helping ratepayers, who have not welcomed this speedy, efficient help.

Mr. Donald Stewart: Is the Secretary of State aware that the scheme that he has announced today will still leave a substantial body of ratepayers paying 300 per cent. more than they have previously paid for rates? Does he think that he can project himself as a Santa Claus by coming with £50 million when the Government have just spent £450 million on an airfield in the Falklands? We have to keep the matter in that context. As the right hon. Gentleman accepts that there is a case for relief in this year, he cannot deny that this relief must be continued on an even wider scale until the Conservative Government relieve the ratepayers of the present system.

Mr. Younger: I explain again to the right hon. Gentleman, as it may not have been clear from what I said, that no ratepayer in Scotland, either commercial or domestic, will be facing an increase of 300 per cent. I have said that three times the rateable value will be the trigger for this help, which will mean that increases in what ratepayers have to pay will he paid at a much lower level than that. I am not responsible for airports in the Falklands, but only for airports in Ayrshire.

Mr. Gerald Malone: Is my right hon. Friend aware that the ratepayers in the city of Aberdeen and in Grampian region will not share the view of the hon. Member for Gordon (Mr. Bruce) that my right hon. Friend has a warped sense of priorities in bringing forward such a measure of relief but that they will thank him for it? It is good that smaller businesses will benefit from this, as a large number of commercial concerns in my constituency were suffering and will welcome this measure.

Mr. Younger: I am grateful to my hon. Friend, and he is right to say that our principal objective for commercial ratepayers has been help for small businesses. Strong representations about the increases have been made to us by those people, and I am glad to be able to help. I could not more agree with my hon. Friend. It will be interesting to have on record that the hon. Member for Gordon (Mr. Bruce), and I presume the Liberal party, think that this is a wrong set of priorities.

Mr. Hugh Brown: Whatever the motivation of this statement, it is a significant one, as it changes the rates liability for, a minority of ratepayers, both domestic and commercial. How many people does the Secretary of State expect will benefit? Is it the intention to have a discretion about the upper limit of relief? Will there be consultation with COSLA and the assessors association before the regulations come to the House?

Mr. Younger: I am grateful to the hon. Gentleman for making an important point. It is unusual, and I do not know whether this has ever been done before in Scotland following a revaluation. As to the numbers affected, I expect — it is difficult to be precise — that this will probably help about 50,000 commercial ratepayers and it might help as many as 250,000 domestic ratepayers. The regulations will spell out the methods by which this will happen, but the Bill will spell out the general principles of allowing help to be given to commercial ratepayers, which is not possible at the moment.

Mr. Michael Hirst: I warmly congratulate my right hon. Friend on his success in obtaining fresh funds to help the hardest pressed Scottish ratepayers. His statement will be most warmly welcomed by the many family owned businesses, particularly in Strathkelvin and Bearsden, which are facing significant increases in their rates bill this year.
Further, does my right hon. Friend agree that it is a measure of the pathetic inability of alliance Members to calculate figures that two weeks ago they were seeking relief amounting to £4 million for commercial ratepayers as opposed to the £40 million of relief which my right hon. Friend has announced today?

Mr. Younger: I thank my hon. Friend for his welcome of this measure. I can only contrast it with the fact that the Opposition, including the Liberal party, appear to be highly unhappy about the fact that we are providing help which is not only generous but about 10 times the maximum level asked for by any of the Opposition parties. It is clear who is prepared to put their money where their mouth is for Scottish ratepayers.

Mr. Dick Douglas: Would the Secretary of State care to explain to the House exactly what he means by "new money"? Is this not recycled money? He has won back from the Chancellor money which the Chancellor had already taken. Will he explain to the House the position about revaluation and the rating system in Scotland? Would it not be better for him to say that he is interfering with revaluation and that we ought to postpone the whole exercise so that local government finance can be placed upon a reasonable footing?

Mr. Younger: The answer to the hon. Gentleman's first question is that "new money" means what it says. It will not lead to reductions in any other part of the Scottish Office programme. Therefore, it will come from the contingency fund. As for the hon. Gentleman's second point, he is absolutely right. This is interfering with the results of revaluation. Whether or not he has decided to change his mind, I would remind him that he, through his party, has solidly supported revaluation.

Mr. Douglas: I have not.

Mr. Younger: Yes — under the leadership of the hon. Member for Glasgow, Garscadden (Mr Dewar) and his predecessor, I was pressed to ensure that revaluation took place this year. So did the Convention of Scottish Local Authorities. As for its interfering with the results of revaluation, of course it is, because we can see the hardship that it is causing to domestic and commercial ratepayers and we are prepared to do something about it.

Mr. Barry Henderson: I apologise to my right hon. Friend for having missed hearing him make his statement, which will be warmly welcomed by those in the commercial sector who are most affected. Is he aware that for the average ratepayer in Fife the real problem lies with the overspend by 8p in the pound of Fife regional council? In addition to helping those who have been hit by revaluation, can my right hon. Friend assure the House that he will shortly be announcing selective action against wildly overspending authorities such as Fife?

Mr. Younger: My hon. Friend is absolutely right about the effect of overspending. As I said a few moments ago, two thirds of the increase that, on average, people are

facing in Scotland is due to the overspending of councils. That is the main point and my hon. Friend is quite right to make it. As for the rest of his question, I agree that this matter will have to be carefully considered, but I am not yet in a position to make an announcement about possible selective action against any particular authority.

Mr. Tom Clarke: Will the right hon. Gentleman accept that the word "overspending" is a Government term plucked out of thin air, and that it is based on nothing else? Secondly, will he accept that this turmoil did not arise over previous revaluations, because the rate support grant settlements at that time anticipated events? Finally, will he discourage his hon. Friends from insulting local authorities which will have to deal with the changes that have been announced in this statement, because their good will is essential if they are to rescue their ratepayers from the muddle created by the Government?

Mr. Younger: The hon. Gentleman is failing to give the whole picture—unintentionally, I am sure—when he questions the level of overspending. The truth is that local authorities in Scotland are still planning to spend next year nearly 2 per cent. more in real terms than they were spending in 1979. That is a measure of the overspending of certain councils, bearing in mind that a large number of councils—about half of them—are not overspending but are spending within the guidelines. That puts the matter into perspective. I hope that the hon. Gentleman will agree that, whether or not we wish it to be that way, all Governments have to exercise some control over local Government spending. The hon. Gentleman's own Government, when he was in COSLA, had to propose in 1976 the most stringent and severe reductions that were ever made. The hon. Gentleman should recognise that the right hon. Member for Glasgow, Govan (Mr. Milian) did that.

Mr. Robert Maclennan: Does the Secretary of State forget that, long before revaluation, both parties of the alliance called for the relief of commercial ratepayers from the burdens of revaluation and from the system, which we called upon him to change? Does he remember, though he dismissed this appeal in the House at the time, that we pressed him to take commercial subjects into general taxation and out of rates altogether and to allow local authorities to recoup some finance by way of charging for their services? Therefore, his attack on the Liberal party is wholly misplaced. The Liberal party and the Social Democratic party have been urging radical reform. If the Secretary of State chooses to overlook this fact, commercial ratepayers in Scotland, like commercial ratepayers in England, will not, when given the opportunity.

Mr. Younger: If the hon. Gentleman and his colleagues have been campaigning for not having a revaluation, they have been doing it silently, which seems to be a very strange way of going about it. I have looked up the record. They did not object to revaluation or oppose it in any way. The hon. Gentleman may have been campaigning for the relief of commercial ratepayers, but I have not noticed him doing so. If he was, he was calling for a maximum sum. The biggest sum was about £5 million. [HON. MEMBERS: "No."] That is the biggest sum asked for by anybody. Most of them were much smaller.


This Government have produced a great deal more money. From his neutral position in between the two parties, I should have thought that the hon. Gentleman would be glad to congratulate the Government upon having done so.

Mr. John Home Robertson: Will the Secretary of State let us in on a wee secret about the priorities which were in his mind when he was compiling this interesting package? Was it, on the one hand, the resolution of the long-term problems of local government finance in Scotland, or was it, as some of us believe to be more likely, the short-term preservation of Conservative seats in Scotland?

Mr. Younger: The priority which I have had in mind, if the hon. Gentleman has not, has been the plight of those ratepayers who have suffered very large rates increases. I am prepared to do something about that. The hon. Gentleman, apparently, is not.

Mr. William McKelvey: I welcome the statement that has been made by the Secretary of State for Scotland. It will give me the opportunity to tell the good people of Kilmarnock, hopefully on Radio West Sound tonight, that the representations and protests that I have made steadily over the past six months to the Secretary of State on their behalf have eventually borne fruit. If the £50 million which is to be paid back is added to the £38·5 million that was previously redistributed to ratepayers in Scotland, it totals almost £90 million. If this had been added to the cut in rate support grant in 1984, it would have brought the rate support grant back to the level at which it stood last year, a level which the Opposition have been arguing for the past nine months ought to have been retained. It will be a financial nightmare to try to work out this formula. We await with interest just how much pleasure or displeasure will be shown by some ratepayers over the pay-out system.

Mr. Younger: I am very encouraged to learn that the hon. Gentleman, who is a constituency neighbour of mine, has, apparently, second sight. I understand that he started campaigning for help six months ago. He was therefore in the position of supporting revaluation, but before he knew the results of revaluation he demanded that it should be modified by help for commercial ratepayers. That is very nice to know. I am grateful for the hon. Gentleman's welcome of the proposals. May I reassure him that the calculations are relatively simple to make. If one's valuation has gone up by more than three times and one is either a commercial or a domestic ratepayer, one is entitled to help on this basis of 100 per cent. of the amount applicable to that, above three times, subject only to the £10,000 cut-off.

Mr. David Lambie: The right hon. Gentleman is wrong in stating that in 1983 everybody in Scotland was in favour of the 1985 revaluation. May I remind him that some of us have been warning him not only about the effects of the 1985 revaluation but also about the effects of the 1978 revaluation, because revaluation in England has been halted since 1973. In 1978, I had the right hon. Gentleman's support against that revaluation, but at the time he was in opposition. When will the Government and all the other political parties in the House stop tinkering with the rating system in Scotland, abolish it and the assessors' departments and introduce a 100 per cent. Government grant? When will

they get rid of all this and allow local authorities to spend their money in whatever way they want? That is the only solution; I hope that the right hon. Gentleman will allow that to be considered during the passage of his Bill.

Mr. Younger: I appreciate the hon. Gentleman's point. Perhaps I have done him an injustice. I always assume that, whatever the Labour party is in favour of, he will be against. I should have realised that earlier. I notice his wish, which I have known for a long time, to abolish the rating system altogether. That is one of the things that will be taken into account in the further review that is now under way.

Mr. Gordon Brown: Will the right hon. Gentleman accept that the real crisis in local government is that he has taken £1,000 million from local government since 1979 and that Fife region has suffered severely from that policy. If Conservative Members want to change the policies of Fife region, they should do so by the ballot box at local authority elections, not by Government diktat. Will the right hon. Gentleman now answer one question that he has so far omitted to answer? Will there be relief for domestic and commercial ratepayers next year—yes or no?

Mr. Younger: On the £1,000 million, the hon. Gentleman has made a calculation of what might have happened, but he has ignored the fact that local government spending has gone up in real terms since 1979. That puts his remarks entirely in perspective. Ai a time when many other parts of the public sector have had to cut back, local government has not yet succeeded in doing so.
I appreciate that Fife region would like to spend more money, but I note that it appeared to have no difficuIcy in finding £2 million to spend in support of striking miners, so it cannot have been that pushed for money.
I have already said that next year will fall to be considered in the normal way when next year's public expenditure is under consideration.

Mr. John Maxton: Why does the right hon. Gentleman keep insisting that he has acted on the basis of new facts, when the Government must have known the effect of revaluation six months ago? Is it not the case that the only facts that the right hon. Gentleman has taken into account over the past few weeks are the opinion polls in Scotland, local government election results and the letters that he has been receiving from thousands of his constituents and from his Back Benchers?
Will the right lion. Gentleman accept that the answer that he has just given about next year simply is not good enough? Will he make it clear that he repudiates the statement made by the Chancellor of the Exchequer at Perth last weekend and that if he does not win the argument between himself and the Chancellor in the Cabinet he will resign as Secretary of State for Scotland?

Mr. Younger: On the question of new facts, the hon. Gentleman needs to study the timings of this revaluation a bit better. Nobody, not even the Secretary of State, can know the results of the assessors' calculations before the assessors have made them.

Mr. Harry Ewing: The right hon. Gentleman was warned by the assessors as far back as November last year.

Mr. Younger: The hon. Gentleman anticipates what I am about to say. The first information came in late


October. As soon as the first information was to hand I took action and raised the domestic rate relief from 1p to 5p. When the further refinement of the figures was available in February we went further and at the first moment increased the 5p to 8p. During the last few weeks we have been assessing the details of the assessors' views on the valuations for the commercial subjects. In the face of the fact that there is no legislative provision for helping them now, we have assessed the matter and have produced proposals and a larger sum of money than anyone asked for in order to help them. In all honesty anybody who is being at all objective would say that that is a pretty good response to a difficult problem.

Mr. Archy Kirkwood: Reference has been made to the contents of my ten-minute Bill and I want to take the opportunity to put the record straight. First, I welcome the proposal. I do not want to be niggardly about that. I think that my hon. Friends will also welcome it. Anyone who studies my introduction to the ten-minute Bill will see that I talked about £5 million being a start, but, there is an important second objective in the proposal that I was putting forward. It is that the Bill was designed to help those whose increases were in the same order of magnitude as the level of profits. My worry is that some of the £40 million will go to a lot of businesses in Scotland which do not need that to survive. That is why there is a difference in scale. It is a bit unfair for the Secretary of State to imply anything different about the scheme which was worked out by the National Federation of Self-Employed and Small Businesses.

Mr. Younger: I have made no mention of the federation; I have been referring to that august body, the Liberal party, which has been posing as the supporter of the commercial ratepayer without the faintest idea how much money was being asked for or what it was for. With great respect to the hon. Gentleman, before he introduces another ten-minute Bill he had better get his figures right.

Mr. Jim Craigen: A threefold increase in rateable value will be necessary before commercial or domestic ratepayers are eligible for this new form of relief. I know that the Scottish Office will reimburse the authorities' expenses, but how will the money be paid out by the rating authorities? The Secretary of State said that in the commercial sector the average effect of revaluation had been neutral. How many in the

commercial sector fall between that neutrality and the threefold increase in rateable value that was referred to in the statement? How did the right hon. Gentleman work out that those eligible in the commercial and domestic sectors will roughly equate to £40 million and £10 million?
Finally, the Secretary of State says that it is not his job to do the work of the assessors. May we take it that in terms of administering the scheme he is really proposing that the cut-off point of the threefold increase should be entered into the valuation roll, or will it simply apply to the demand notices for 1985–86? With hindsight, does he not wish that he had looked a bit more closely at the provisional figures that he was receiving last November instead of creating all this chaos in the rating and valuation system?

Mr. Younger: On the hon. Gentleman's last point, however closely I looked at the figures given in November they showed the commercial sector as neutral. It was only when the detailed figures began to come through that we discovered, as did the hon. Gentleman that while the generality is neutral there are some with vast increases at the top end, and, of course, there are also some with vast reductions, but people keep quiet about that.
The hon. Gentleman asked about the method and the threefold threshold. That has to be seen against the background that the average increase in valuation for domestic ratepayers is 2·7 times. That is pretty generous in that it is pretty close to three. For commercial ratepayers the average increase in rateable value is 2·2 times and, again, we cannot be said to be ungenerous when we are going to start the extra help at three times. I think that most hon. Gentlemen will agree with that when they think about it.
As for the commercial sector being neutral, I cannot make the calculation at the moment as to how many are not affected by the assistance, still less the breakdown between those who are between the 2·2 times and the three times and those who are below 2·2 times and who will therefore receive reductions in their rates. It is difficult to give those figures, but, as I said earlier, about 50,000 of the worst affected commercial ratepayers will get this relief for which I am sure they will be grateful.
A ratepayer who feels that he comes within the scheme need do nothing immediately, but, if the Bill is enacted, he will apply to his local authority for relief which he will get in due course. On the method of doing that I shall have to consult COSLA and obtain its views.

Rent (Amendment)

Mr. Michael Mates: I beg to move,
That leave be given to bring in a Bill to make further provision as to the circumstances in which possession of a dwelling-house is recoverable under Case 11 in Schedule 15 to the Rent Act 1977 and Case 11 in Schedule 2 to the Rent (Scotland) Act 1984 and as to the parliamentary procedure applicable to an Order in Council under paragraph 1(1)(b) of Schedule 1 to the Northern Ireland Act 1974 which states that it is made for corresponding purposes.
The Bill seeks to put right a flaw in two previous Rent Acts which has come to light only recently as a result of an Appeal Court decision.
It was the universally held view that case 11 of schedule 15 to the Rent Act 1977, which repeated the provisions of the Rent Act 1965, meant that an owner who let his or her home on a contractual tenancy while he or she was away could repossess that home once the contract had ended. The Appeal Court, however, in the recent case of Pocock v. Steele found that, because there had been a further letting during the absence of the owner, that provision did not apply. Therefore, my constituent, Mrs. Pocock, was unable to get back her home and her possessions inside it.
The result of that judgment is that many people who have let their homes in good faith for a short period while they are away overseas—perhaps on Crown service or on private business—may not now be able to repossess either their homes or their goods and chattels inside their homes.
The purpose of the Bill is, therefore, to restore the law to that which Parliament thought it was when it enacted those measures—first, the Labour Government in 1965, the Labour Government again in 1977 and the Conservative Government in the Housing Act 1980. We seek to restore the position to that which every Member of the House thought it was at the time when those measures were enacted.
It will not be news to the House that this sort of legislation cannot be enacted by a private Member without the consent of all the parties in the House. I am happy to

say that this is one of the more civilised occasions in the House when all parties are agreed that the Bill should become law at the earliest possible moment.
I am grateful not only to the hon. Member for Copeland (Dr. Cunningham), but to the hon. Member for Birmingham, Perry Barr (Mr. Rooker) who has written to me in generous terms:
I write on behalf of the Official Opposition to confirm that we have no objection to your proposed Bill. Indeed we hope it reaches the Statute Book.
I am grateful also to the hon. Member for Southwark and Bermondsey (Mr. Hughes), who speaks on housing matters on behalf of the Liberal party, and to the hon. Member for Woolwich (Mr. Cartwright), who does the same on behalf of the Social Democratic party. The fact that I have not contacted hon. Members representing all the minor parties is a matter for which I apologise, but I have been unable to identify who speaks on this matter.
I therefore hope that I shall be given leave to bring in the Bill and that, with the help of all concerned, it will have a speedy passage through the House and become law, so that the law returns to that which we all thought it was until the Appeal Court, in its correct independence, informed us otherwise.
Question put and agreed to.
Bill ordered to be brought in by Mr. Michael Mates, Mr. John Cartwright, Sir Paul Hawkins, Mr. John Heddle, Mr. Simon Hughes, Mr. Allan Roberts and Mr. Neil Thorne.

RENT (AMENDMENT)

Mr. Michael Mates accordingly presented a Bill to make further provision as to the circumstances in which possession of a dwelling-house is recoverable under Case 11 in Schedule 15 to the Rent Act 1977 and Case: 11 in Schedule 2 to the Rent (Scotland) Act 1984 and as to the parliamentary procedure applicable to an Order in Council under paragraph 1(1)(b) of Schedule 1 to the Northern Ireland Act 1974 which states that it is made for corresponding purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 17 May and to be printed. [Bill 146.]

Orders of the Day — Oil and Pipelines Bill

Order for Second Reading read.

The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith): I beg to move, That the Bill be now read a Second time.
The House is familiar with the background to the Bill. Over the last six months we have had two reports from the Select Committee on Energy and, as a result of the reports of that Committee, we have had two debates on the Supplementary Estimates which the Government have asked the House to approve for grants to cover trading losses of BNOC. On 13 March I announced the Government's conclusions regarding the future of BNOC. At this stage I should like to pay tribute to the work of the Select Committee on those two reports.
I appreciate that the conclusions to which the Government have come are not of course the conclusions of the Select Committee, but it is significant that the analysis that led up to those conclusions was very helpful to the Government in reaching their conclusions. Indeed, I think that there is not a great deal of difference between the Government's analysis of the background and the analysis of the Select Committee. I certainly pay tribute to the work of the Select Committee leading up to the Bill. I wholly accept that the Select Committee will not neccessarily agree with the Government's conclusions, and I make that point plain. The analysis was very helpful, as was the evidence taken by the Select Committee.
When I announced the Government's conclusions on the future of BNOC I mentioned—and I repeat today—that it is our belief that the balance has shifted decisively against the retention of BNOC in its present form. At the time of the announcement and in the brief debate on the report of the Select Committee, I made it clear that the Government believe that there are a number of functions currently performed by BNOC that should be retained. First, there is the function of the custody of participation agreements; secondly, there is the power to dispose of royalty in kind; and thirdly, the power to act as agent for the Government in the management and running of the Government's oil and pipeline system. The conclusion that I announced on 13 March was that it was appropriate to establish a small oil and pipelines agency to perform these functions. The Bill, if approved, will give effect to these conclusions.
I do not intend to go into all the details and the background of the reasons for the abolition because I outlined those in my statement, and the House considered them in the debate on the Supplementary Estimate initiated by the Select Committee.
The Bill seeks to preserve what we believe to be of continuing value with regard to BNOC's current institutional arrangements and to discard those parts of its arrangements which we believe have become outdated or in some cases a potential liability. The one item which we believe is outdated and has a potential to become a liability concerns the contractual arrangements under which BNOC acquired and sold participation oil. Although, as I freely acknowledged in earlier debates in the House and in my

evidence to the Select Committee, that is a function which has been important in the past and one which BNOC has performed with distinction, I believe that for a number of reasons it has now ceased to provide a means to prevent instability. It was in the means to prevent instability that the main purpose of the exercise of this function lay. The reason, as I explained to the House previously, is that in recent years, and particularly in recent months, we have seen fresh developments in the market which I believe give these arrangements for contracting and trading in participation oil the potential to spark off a cycle of competitive undercutting which, far from being a force againt destabilisation, would run a serious risk of dragging down prices to an unsustainable level.
That was very much the basis of the evidence that I put before the Select Committee, and which we discussed during our debate on the Supplementary Estimate. Therefore, we have had a full debate on that matter. Basically, it stems from the growth, not only in the United Kingdom but worldwide, in the spot market and the decline in contract sales at a term price. As we do not envisage those forces changing in the foreseeable future, we believe that it is right to change the institutional arrangements to take account of the changes in the oil market over recent months and years.
I wish to make it clear that this is not a case—as the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) tries to make out—of trying to cut down some lame duck state corporation that has been losing money through inefficiency or failings. That is most certainly not the Government's view. What we are doing is no reflection on the corporation or its staff. The corporation maintained its prices after consultation with the Government and taking account of the national interest. It is our continuing belief that those decisions were correct in the national interest. However, because of those decisions it was necessary to come to the House for a Supplementary Estimate to cover the losses. Our proposals today are a reflection not on the staff or the operation of the corporation, but simply on the development in the structure of oil markets that we have discussed at length on previous occasions.
Although we are discarding the major function and purpose of BNOC, it has other functions and purposes. One of those, to which the Select Committee attached importance, is security of our supplies. That is central to the whole matter. On its other functions, while there were contract sales at term prices BNOC served a useful purpose in providing transparent evidence of arm's length prices for North sea oil. That was helpful to the oil taxation office for transfers of oil within integrated oil companies. However, that must be considered apart from the structure and organisation of BNOC, because the virtual disappearance of term prices for oil destroys the value of the diminishing evidence available to the oil taxation office. Therefore, although it served a useful purpose in the past, it is not appropriate in the changed market circumstances.

Mr. Bruce Milian: Even if we accept what the Minister says—which we do not—what steps are the Government taking, through the oil taxation office or by any other means, to deal with changing circumstances to ensure that the taxpayer is not ripped off by fancy transfer prices or various devices to reduce the tax burden?

Mr. Buchanan-Smith: The right hon. Gentleman has a direct interest in these matters, so I am surprised that he does not agree with my analysis of the background. He knows that one of the problems that the Government have had to face —I am sure that he has read the evidence before the Select Committee — is that the loss of contract sales — with sales taking place at different values, sometimes at spot price — has thrown considerable doubt on the use of the prices established by BNOC for taxation purposes. Under the legislation, what is required is actual evidence of the price at which the oil passes from one affiliate to the other. The oil taxation office is in discussion with the oil companies about that —as it would have had to have been regardless of what we are doing in the Bill. It is an important issue, but one that would have arisen anyway.
Another useful purpose of BNOC has been as a marketing agency for smaller licensees. I know that many of the smaller companies have found it convenient and helpful to market through the corporation. However, I do not believe that it is in any way an essential purpose of the corporation. There are other possibilities, such as disposal to larger producers or—and discussions are taking place on this now — the possibility of setting up either independent agencies or co-operative agencies. Therefore, although that purpose was useful in the past, it is not one that necessarily requires or demands the need for intervention by a state corporation.
On the issue of security of supplies—

Mr. Peter Rost: On the marketing of oil by the smaller companies, has my right hon. Friend sought any assurances, and can he confirm reports in the press, that the larger multinationals have reached an accommodation with the smaller companies, or are in the process of doing so?

Mr. Buchanan-Smith: Obviously, any arrangements are commercially confidential to those making them. I have certainly received indications that discussions are taking place. If the arrangements are not actually made, they are in the course of being made. There is also a certain amount of talk about other initiatives, such as the setting up of independent or co-operative agencies. I have not seen any evidence that shows that the normal commercial organisations will not be able to cope.

Mr. Ted Rowlands: Of course they can cope.

Mr. Buchanan-Smith: The hon. Gentleman underlines his political motivation in wishing to keep in being a state corporation when there are perfectly adequate organisations available in the commercial sector.
I know that security of supply has concerned the House, and I made considerable reference to that during my speech on the Supplementary Estimate. It is important to look not only at the role that BNOC has performed in carrying out the contracts in participation oil, but to examine the background to the security of supply and the existing arrangements.
If, for example, there was an interruption of supply from the Gulf, we could turn to the international agreements—which have been refined and developed over the years and especially since BNOC was established —through the International Energy Agency and the EC to make arrangements to take care of any severe

disruption. I use the words "severe disruption" advisedly because the international arrangements under the IEA can be triggered only where the shortfall is of the scale of 7 per cent. or more of OECD country supplies. Therefore, the IEA arrangements exist where there has been a severe disruption. Where there is a less severe disruption there are informal arrangements.
Where there is severe disruption the arrangements through the IEA guarantee to the United Kingdom an appropriate share of the remaining production in the free world, irrespective of the companies. corporations or agencies that may be handling the production. Where the shortfall is big enough to trigger the international obligations, access to North sea oil is not as important as it may have seemed at one time. In any case, as a fallback under the Energy Act 1976 the Government have power in a crisis to control oil production on the United Kingdom continental shelf, whoever produces it and whatever the contracts may be.
On security of supply the real concern must relate to minor interruptions up to the 7 per cent. trigger point which comes under the IEA agreement. Again we must remind ourselves that in that case it is not an interruption of access to crude oil that matters, as has been shown in the past, but rather access to the oil products that are needed by industry, transport and so on. The real burden of the responsibility to meet a crisis of a smaller nature would fall on the private refining and marketing companies which supply those products and not on the state itself or on any agency of the state.
The Government have obtained from the refining and marketing companies assurances that we believe would meet that kind of crisis. Most important, they are concentrated on products where the demand and the need would be. To put it in a form that is easier to understand, a shortfall of 7 per cent. is equivalent to 25 or 26 days of actual supply. Since, currently in the United Kingdom, subject to the informal arrangements that we have. stocks of products stand at 92 days' supply, obviously the arrangements we have with the refining and marketing companies are adequate to fill the gap and would give time to reactivate participation if it was felt to be necessary, and which the agency could do with the consent of the Secretary of State. Given the arrangements that I have taken some trouble to describe to the House, I do not believe that the abolition of BNOC should in arty way diminish the country's security of supply of oil or of its products, which are most important.

Mr. Rowlands: I have searched high and low to find the character and nature of the assurances upon which the Minister rests so much of his case. Are they published? Are they available? Will they be made available to the House or to the Committee on the Bill so that hon. Members can judge for themselves how real the assurances are?

Mr. Buchanan-Smith: These are informal assurances that the Government have from the oil companies. That is the basis on which they have been for some years. The Government and I are confident that they would be carried out in the kind of crisis I have described. The details are confidential. I. shall see whether I can give more information to the hon. Gentleman and to members of the Committee. As there is still a fallback in a time of real crisis to exercise the participation rights, I believe the


arrangements I have described are adequate. I emphasise that in the Bill we are not abolishing the power to exercise rights of participation.
In regard to some of the other functions of BNOC which we are continuing under the smaller agency, we have the Government pipelines and storage system which covers 1,000 miles of oil pipeline and 41 oil storage facilities. Over the period that it has operated the system BNOC has built up an effective team. We intend to retain that function.
Another function that we intend to retain is the power to operate in royalty in kind. Of course, the Government remain entitled to royalty in kind. Therefore, I wish to retain in the new agency the mechanism to obtain the best possible price for the realisation of the royalty in kind.
I have mentioned specifically four main functions—the exercise of participation rights, which the new agency will not operate but which it will have the power to operate, subject to the agreement of the Secretary of State, should it be thought necessary to activate that power; security of supply; the operation of the pipelines and storage system; and the power to operate the royalty in kind.

Mr. Rowlands: The Minister talked about the role the agency will play in marketing the Government's royalty oil in kind. That figure is theoretically 280,000 barrels a day. In the past there have been sale-back arrangements. If they were continued or conceded by the Government they would leave the agency with only about 100,000 barrels a day to trade. Can the Minister tell us the intention of the Government in relation to the royalty oil in kind?

Mr. Buchanan-Smith: The arrangements made between BNOC and companies will be taken over by the agency. The power to operate the royalty in kind will be in the legislation. The functions may be changed in the future while royalties in kind continue to exist. As the hon. Gentleman knows, they will eventually be self-extinguishing. The agency will be empowered to trade in that oil. I shall explain that more fully when I deal with the clauses in the Bill.
The Government think it important to get the new organisation moving as quickly as possible. Because of market sensitivity it was necessary to announce the decision as we did. I understand the uncertainty that the announcement caused immediately. It is important for the future that the organisation of the new agency becomes clear as quickly as possible.
My right hon. Friend the Secretary of State has already announced the appointment of the chief executive designate who will become the chief executive subject to the passage of the legislation. Mr. Kenneth Vaughan joined BNOC in 1978. He is, therefore, already a member of BNOC's staff. Prior to that, he was for 20 years with BP, and he spent 11 years with the Kuwait National Petroleum Company. For the last three years his responsibilities in BNOC have related to the piplines and storage system and to LPG trading. We are fortunate to have the services of someone with his wide experience and, in particular, with his experience of BNOC.
My right hon. Friend hopes to make an announcement as soon as possible about the appointment of the chairman designate. The appointment of the chief executive designate will help the future management to decide on the

staff necessary for the manning of the agency, and I know that Mr. Vaughan is pressing ahead with that. I do not want there to be any unnecessary uncertainty, and, as the organisational arrangements go ahead, the details will be made known in the appropriate way.
I will explain the main provisions of the Bill. Clause 1 provides for the establishment of the agency and lays down its board structure. That is a straightforward provision, particularly bearing in mind the background that I have described.
Clause 2 sets out the functions of the agency, with its responsibility for the disposal of royalty in kind, for managing the Government pipeline and storage system and for maintaining the participation regime which I have explained.
The agency will also have power to trade in petroleum on its own account, but such trading will be subject to the Secretary of State's consent. That consent will be given only for limited purposes. The first purpose is to enable it to maximise the proceeds from the disposal of royalty in kind because, in the course of trading, it may be desirable to do that. The existence of this provision will, I hope, make it clear that the agency need not be hindered for legal reasons from maximising the proceeds.
The second purpose is to ensure that the agency will be able to trade effectively in participation agreements, were they ever to be reactivated. But, as I pointed out, the agency will not be empowered to act as agent for disposing of anyone else's oil.

Mr. Rost: Will the agency be empowered to subcontract out the sale of royalty oil if it thought it economically desirable to do that?

Mr. Buchanan-Smith: The agency will have responsibility in that respect, but obviously it will have to exercise that responsibility from the point of view of proper commercial accountability.
There has been some discussion about the role that BNOC has so far performed in trading in liquefied petroleum gases. The Government do not see any reason for the public sector to remain involved in the LPG market. At present, BNOC handles less than 30 per cent. of the UK continential shelf production of LPG and under 20 per cent. of the total UK output, including that from refineries. The agency could retain sufficient volume of LPG to trade effectively only if it continued to exercise options to purchase LPG under participation agreements. That could not be justified with participation trading in crude oil—this is one of the main purposes of the Bill— being wound up. In any case, since January 1982 BNOC has been precluded from exercising new options to take LPG.
Clause 2 enables the agency to enter into new participation agreements, as determined by the Secretary of State, and to give effect to those and to existing agreements. However, it may not, without the Secretary of State's consent, elect to take petroleum under a participation agreement. It is the Government's intention that as new oilfields reach the development stage the licensees should continue to conclude agreements which enable the agency to participate in the oil produced.
It is the Secretary of State's intention to consent to the exercise of an option to take petroleum under such agreements only if such an exercise was finally justified by an existing or imminent threat to the security of the nation's oil supplies.
Clause 3 allows all the property, rights and liabilities of BNOC to be vested in the agency on a day appointed by the Secretary of State. Statutory vesting provisions have been a common feature of legislation introduced by all Governments in recent years and it is our intention, in relation to the agency, to establish it and to use the powers under the clause as soon as the Bill has been enacted, so enabling an orderly transfer to take place to it from BNOC.
BNOC will have to be retained in existence for some time--although in the latter stage very much as a shell —to enable it to draw up final accounts and effect the transfer of property, assets and liabilities. Clause 3(5) requires BNOC to be dissolved formally as soon as those tasks have been completed.
Schedule 2(2) makes provision for the contracts of employment of BNOC staff to be transferred in their entirety to the agency, so that the employees' terms and conditions are not adversely affected by the transfer. It also makes appropriate provision for pension rights.

Mr. Dick Douglas: Apart from altering participation agreements and BNOC's role in obtaining oil, selling it back and otherwise operating in the market, the Government could have reached the conclusion that BNOC should remain in place but should not, for the foreseeable future, set a price.

Mr. Buchanan-Smith: It is sad that the hon. Gentleman did not attend the meetings of, or hear my remarks before, the Select Committee. I said that it would have been perfectly possible to have done what he suggested — there is here a straight political divide between myself and the hon. Gentleman—but that we saw no point in keeping it in being if its function was simply to trade in oil at the market price, a function which others were perfectly able to do.
I appreciate that the hon. Gentleman is devoted to state organisation and interference in trading in this and other matters. However, so long as BNOC is not performing the function that it had before in relation to avoiding destabilising the market, and is simply trading at the market price, that purpose is, in our view, outdated. I am sorry to have to repeat that, and I do so for the hon. Gentleman's benefit.
Clauses 4 and 5 and schedule 3 make the financial provisions to enable the agency to perform the responsibilities that I have described.
I have paid tribute to the effective way in which the staff of BNOC have worked in the past. The board of BNOC is paying particular attention to the question of assisting the staff, the majority of whom will have to move from the corporation, although, as I have pointed out, some staff will be needed for the new agency.
The board has already told its staff the terms of the compensation arrangements for those who become redundant. That is a matter for the board, but I understand that the terms are in line with benefits paid by oil companies generally when staff are made redundant.
During April, my right hon. Friend the Secretary of State met Mr. Roy Grantham, the general secretary of the Association of Professional, Executive, Clerical and Computer Staff, and discussed the genuine anxieties felt by the staff. The corporation is providing special counselling services to help those who will become redundant. I am sure that the board will do all that it can

to ease the transition and to solve the genuine problems faced by those whose careers will be disrupted as a result of the Government's decision.
The Bill is a direct consequence of changes in the oil market. Given those changes, although BNOC served an extremely useful purpose in the past and, as I have acknowledged, served it well, I do not believe that there is any longer a need to maintain a public body to carry out the activities that I have described, many of which can be equally well carried out in the private sector. The new small agency will be better geared to the limited functions that we are retaining. I therefore commend the Bill to the House.

Mr. Ted Rowlands: The Minister and I are playing unusual roles today. We normally reply to debates. I believe that it is the first time that we have opened a debate, and I welcome that opportunity. The Minister's introduction of the Bill begs as many questions as it answers. It also skated over a number of issues which have been thrown up as a result of the decision to abolish BNOC. My hon. Friends and myself will underline some of the dilemmas and issues and some of our fundamental disagreements with the decision to abolish BNOC.
Like the Minister, I wish to pay a tribute to the Select Committee for its work over the past months which led to two debates. The Minister managed conveniently to forget his contribution on 18 December which was a coherent and comprehensive defence of BNOC's fundamental role. I shall come later to one or two of his observations.
I want also to pay tribute to BNOC's staff. The trading arm was severed and the exploration and production side was hived off by the Oil and Gas (Enterprise) Act 1982. Veterans of that Act—I can see one on the Conservative Benches—will recall the lengthy debates that we had about the problems that could arise with the remit given to the corporation and the position into which it was placed. Some of our worst fears were not realised. chiefly as a result of the skill and competence of members of BNOC's trading staff and the way in which they conducted BNOC's functions after the passing of the 1982 Act. I should like to add my tribute to that by the Minister. It is deeply regrettable and distasteful that the staff is receiving this kick in the teeth, especially as there are ways in which we could have solved the problems that the corporation faced this year if it were not for the Government being so ideologically committed to abolishing it.
We should put the Bill into its historical context. It is the second stage in the dismantling and proposed destruction of a successful, profitable, competent and professional corporation. Before the passing of the 1982 Act, the corporation had earned considerable respect, grudging initially, from the oil industry. It served an important and valuable national function. It was the only organisation in the North sea which was 100 per cent. loyal to the nation and, through the Secretary of State, to the House. It was the ears, eyes and nose of the Government and the nation in the North sea.
The organisation was broken up by the 1982 Act. It led to one of the most remarkable flotation debacles — Britoil. The Oil and Gas (Enterprise) Act 1982 was supposed to herald a new era. I remember the debates and so will Conservative Members. A new, independent,


thrusting and enterprising British oil company was supposed to spring up as a result of that Act and of the removal of BNOC from exploration and production.
We all know what a terrible flop the Act has been. Last week, the Secretary of State performed the funeral rites over the gas part of the Oil and Gas (Enterprise) Act 1982. He tacitly admitted that there was little or no future for gas enterprises in the North sea. He intends to create a private monopoly in place of the multitude of private gas enterprises which were supposed to result from the 1982 legislation.
Enterprise Oil has not been a thrusting company. It was supposed to be a young, independent company but the Rio Tinto-Zinc Corporation gobbled up 29 per cent. of its shares within 48 hours of their coming onto the market. The Secretary of State was helpless to intervene. We are now witnessing a process of gobbling up in the North sea. Commercial and economic pressures, I admit, but also Government policies are leading to the gradual disappearance of a number of our independent British oil companies. They have been merged or will be taken over. I mention that because it is relevant to the Bill. One of the sad subsidiary contributions to that process will be made by the Bill. It will contribute to the continuing disappearance of the small independent oil companies.
The Minister did not pay as much attention as the small independent oil companies might to the role that BNOC played on their behalf. BNOC offered a commercial service to the small independent oil companies who had small amounts of oil—about 8,000 or 10,000 barrels a day—and who believed that they would receive a more secure and better deal by taking it to a national oil corporation than they would by trading at the mercy of the bigger boys.
The right hon. Gentleman was sanguine about the impact that the Bill would have on the trading activities of small oil companies and the way that they would have to come to new arrangements with the oil majors. The evidence that they gave to the Select Committee was not sanguine. I know that the right hon. Gentleman has read the report as carefully as I have, but I draw his attention to appendix 5 of the Select Committee on Energy report published on 8 March 1985. That appendix contains a letter from Westar Oil UK. It states:
For a small producer such as Westar, with no affiliated downstream operations or in-house marketing expertise, the presence of a strong, knowledgeable trading organization like BNOC is a considerable benefit. Without BNOC we would have to try to sell our product to the major refining and marketing companies who have traditionally preferred to handle their own production.
The gentleman who wrote the letter goes on to state, plainly from his personal experience:
The writer recalls vividly the extreme difficulty that small producers had some 20 years ago in marketing their oil. Downstream operations were then (as, largely, now) controlled by the Majors, and they simply refused to purchase crude from independent producers.
That is an unsolicited testimony to the useful and rather more important role—admittedly a subsidiary role—that the national oil corporation played as a trading corporation in assisting the commercial dealings of the small independent North sea oil producers. Every day we read in the newspapers of potential mergers and of huge conglomerates gobbling each other up—for example, the Tricentrol and Britoil activities. Given those

tremendous pressures and the Government's professed wish to have bright, new, enterprising oil companies in the North sea, the Bill will make life harder and more difficult for the small independent oil companies.
I hope that the Minister of State will reflect between now and the Committee stage on what the agency, which will trade in royalty oil and will, I assume, have traders in its membership and on its staff, will say to the small independent companies—for example, Westar, Premier and GOAL. Those companies will ask, "Will you take our 8,000 barrels a day? As you are marketing your royalty oil in kind, will you market our oil as well?"
It does not matter where we stand on the fundamental issues, we must consider this question: what is especially devastating, apart from the ideological obsession with the concept of a trading corporation, about the corporation's fulfilling a useful function? I ask the Minister of State to respond pragmatically to that question.
Clause 2(1)(d) refers to the agency's power
to buy, sell or otherwise deal in petroleum on its own account.
Through that provision, it will be possible for the agency to fulfil a useful function, one which was properly carried out by the corporation.
A remarkable decision was made in the Oil and Gas (Enterprise) Act 1982 — to retain the trading side of BNOC. That was the only positive measure. The decision was made not by Socialist nationalisers or people passionately in love with state corporations, but by the then Secretary of State for Energy, the present Chancellor of the Exchequer, who is probably the ultimate freebooter in the Cabinet. One of the most astonishing and specious reasons given by the Government for abolishing the corporation concerns the stabilisation of prices. I shall deal later with that point, because I think that hon. Members on both sides of the House found the Minister's remarks confusing, to say the least, and ambivalent.
Why did the then Secretary of State choose not to abolish the trading side of the corporation when he was undertaking other acts of privatisation? I have searched high and low through the Second Reading and Committee debates on the Oil and Gas (Enterprise) Bill—I should be grateful if the Minister of State can assist me—for an argument by the Secretary of State that BNOC would be retained to fix prices. It would have been a profanity for him to say that. He must be the one person who would never admit, at least in public, an intention to fix, prop up or stabilise prices. I cannot find a single reference to the idea that the corporation's premier role was to be involved in stabilising prices, but, apparently, its abolition has been based entirely on the fact that it can no longer stabilise prices. Stabilising prices was never the corporation's primary function, although it later played that role.
In the middle of an act of privatisation, the Conservative Government said, "We want to retain the trading side of BNOC because we think that it is the most sensible instrument to control the security of our oil supplies." That is what the then Secretary of State and other Ministers said when taking the Bill through the House. They subsequently upheld that statement. They believed that trading in participation oil was a useful and sensible function of the corporation in controlling oil supplies.
Those are not my views, although I think that they are excellent ideas. Those were the views of the present Chancellor a mere two years ago when he was Secretary of State for Energy. They were the views also of the


Secretary of State for Energy in 1979. The right hon Member for Guildford (Mr. Howell) will recall—he is the man who was in the hot spot during the oil crisis—his statements in the summer of 1979. He said:
I can take powers under the Energy Act 1976 to control movements in conditions of limited shortage, but BNOC's direct access to participation oil, together with royalty oil, strengthens our position.
This Bill is concerned with the abolition of a corporation that trades in participation oil. That trade strengthened our position in 1979 in a crisis; this abolition will weaken our position in any future oil crisis. I vividly remember question after question and statement after statement in the House on the problems during the summer of 1979, and I am sure that those days are ingrained in the memory of the right hon. Member for Guildford.
The Minister of State has made exactly the same points as the Chancellor and the right hon. Member for Guildford. The speech of 18 December 1984, which the Minister forgot to mention, made strong recommendations. I do not think that I am letting out any trade secrets when 1 say that he and I co-operated in presenting the most comprehensive and coherent case for the retention of BNOC. In column 230 of the Official Report of 18 December 1984, the Minister made the basic case for retaining BNOC as a body trading in participation oil and exercising its rights to that oil. Long lead times are involved in this trade. The right hon. Gentleman said that we needed long-term arrangements because they would provide us with secure supplies of oil. I do not believe that the oil market changed between December and May in relation to the basic argument about the security of supply. Prices have certainly changed. What the right hon. Gentleman said in column 230 of the Official Report was valid then, and it is valid now. If the right hon. Gentleman wants to stand on his head—an unseemly posture—he should not expect the rest of us to do so as well. The right hon. Gentleman stood some of the arguments on their head today. We have every right to remind him of them and to reject his arguments, too.
The truth is that BNOC had, and has, in my view, a basic and fundamental role in securing our oil supplies. The alternatives that the Minister of State described have been around for some time. The Energy Act has been around since 1976 but, as the former Secretary of State the right hon. Member for Guildford knows, it is an enormous power, but it is a bit of a power of last resort. The House has to declare a national emergency before aspects of it can be used. The power is meant to be used not for handling a shortage problem but for a massive crisis in our oil markets. It is perfectly reasonable and justifiable legislation but it is a last resort, and so inappropriate for dealing with shortages and crises that fall short of the 7 per cent. figure.
Likewise, the International Energy Agency and EEC arrangements assume a dramatic position. There has to be a dramatic crisis before the arrangements are triggered off. The Minister argued that the participation rights will be in place. He also said that he has the paper assurances from the oil companies. What sort of assurances are they? Are they in the form of letters? Do they have the force of law? If they were challenged in a time of crisis, would they stand up? If any of the oil companies reneged on them, would the Government have the power in law to force them to abide by those assurances? Suddenly the assurances have become informal. We do not know in
what form they are. Are they just letters, saying, "Dear Secretary of State Peter …
Yours sincerely … " and so on? Are the assurances meaningful? Do they have legal presentation? Do they have the binding effect of a contract? We need to know.
The Minister of State made a strong case that we need not have a national oil corporation with all the participation rights and so on because we have those assurances. My fear, and the fear of many hon. Members, is that those assurances would be worth only the paper that they were written on when the crunch came. One should talk to those who faced the crisis in 1973–74 to discover whether oil companies deliver such assurances when the time comes. They plead other obligations and other contractual arrangements. I could list the qualifications and conditions that could be attached. However, I am willing to look at those assurances if the Minister will present them to the House so that we may decide how effective they are.
We should not rest the case of the security of our oil supplies on paper assurances from the oil companies. However, we should rest the case on the right to participation oil— not only the right but access to and trading in that participation oil. Today the right hon. Gentleman did not mention — and in December he argued otherwise — how he and his agency will trigger off those paper participation rights. I should like the Minister to clarify that. The paper participation rights that can be activated in times of shortage and crisis car, be served with six months' notice in half the cases and 12 months' notice in the other half. How much of an assurance is that? I hope that people will hang around and wait and not create too much of a crisis while the Secretary of State and his agency trigger off the participation rights, with the six months' and 12 months' notice.
That is why we have a national oil trading corporation. It is real participation oil, not paper participation oil. Net after sale-back, BNOC trades in about 800,000 barrels a day. It serves on the technical and operating committees on the North sea. It is involved in the detailed decisions of lifting and transporting our oil. That is the real thing. That is what I call a real form of safeguard and assurance.
Will the agency inherit any of those responsibilities? Will it have the right to serve on the operating and technical committees as BNOC does now? That is vital. That is how one knows what is going on, on a day-to-day basis. That is how one finds out how the oil is being lifted and transported. Those are genuine, basic, reasonable and effective ways in which one can know about our North sea oil. If the agency does not do that and does not trade in at least some participation oil, what we have been offered as an alternative to a national oil corporation is a pathetic, stripped-down substitute — yet another new quango serving a limited purpose.
The Minister did not give the figures, so I shall offer mine to the House and see whether he disagrees. These are the 1984 figures. Net after sale-back BNOC trades in about 800,000 barrels a day. I hope that the Minister will correct me if I have got the figures wrong. I had to do my own research, and I want to make sure that I am giving the factual statistics. BNOC trades in about 430,000 barrels a day of participation oil and about 260,000 barrels a day of royalty oil. It trades in about 175,000 barrels on a commercial basis, in voluntary commercial deals, often with the small independent oil companies and some quite large companies. That is about 850,000 barrels altogether.


How many barrels will the Oil and Pipelines Agency trade in? The hon. Member for Erewash (Mr. Rost) also raised this matter. I understand that the agency will trade in royalty oil. Is that correct?

Mr. Buchanan-Smith: indicated assent.

Mr. Rowlands: The Minister nods in agreement.
Will the agency trade in 260,000 barrels a day of royalty oil? That was the point of my intervention, which was not minor or clever, but fundamental. Until about a year ago, quite a few of the large major oil companies had arrangements on sale-back of quite a large percentage of royalty oil in kind. Of the 260,000 barrels, about 160,000 barrels or so a day were sold back to the major oil companies, but they dumped it on the national corporation recently. They did not ask for the royalty in kind, so the royalty figure is now 260,000 barrels a day at its maximum. That is nearly a quarter of what BNOC trades in. The volume for security of supply is important. If the agency did not trade in 260,000 to 280,000 barrels a day, it would be worthless. It would be scarcely worth setting up. It would be an incredibly pale shadow if it were trading in a net figure of 100,000 barrels a day of royalty oil. One need not bother to do that. One would not get the people who felt any sense of commitment if they were to trade in such minimal amounts of oil. There would be no security of supply if the figure were down to 100,000 barrels a day.
When he winds up, perhaps the Minister will give us a clear undertaking and assurance that the agency will be a form of insurance policy, an organisation with a right to trade in oil, which will endeavour to give security of our supply, and trade in all royalty in kind. However, in itself that will not be much good because, as the Minister said, it is self-extinguishing. After two years royalty oil will drop rapidly and dramatically because we passed the Petroleum Royalties (Relief) Act 1983 to remove our royalty in the new fields. In six of the older fields, the Government did not elect to take royalty oil in kind anyway. After two years, the agency will dwindle as the royalty oil dwindles. How secure will our oil be then? An agency trading in royalty oil is supposed to be a new factor in ensuring our security of supply, but in three years' time it will be far less important.
The Minister also said that he would not allow the agency to trade in liquid petroleum gas. I find that statement astonishing. The Government are abolishing BNOC because of changes in the market and the movement from contract to spot price, but the curious feature of the LPG market is that it has not done that. It is still substantially a contract term price market. It also happens to be one of BNOC's most profitable businesses. Why should the agency be forced to turn its back on good profitable business which has helped to stabilise the market and has not manifested itself, like the crude market, by going dramatically from term and contract price to spot? Why should the agency not be allowed to trade commercially and profitably on BNOC's LPG contracts? The Minister said that the trade was not large, but 500,000 tonnes could be a profitable sideline. We shall return to that matter in Committee.
I do not think that the way in which the Government are establishing the agency will attract top people. The staff of BNOC deserve an assurance that nobody will be forced to transfer from BNOC to the Government's Oil and

Pipelines Agency, or GOPA. It sounds about as good as it looks — cacophonous. Will proper redundancy and severance terms be negotiated with the staff? There should be no forced transfers from a good trading organisation which was respected and attracted first-class people to an agency which, unless we can beef it up in Committee, will be unable to attract anybody who is not second or third-rate because it will not have a meaningful function.
The only oil that the new agency will trade in will dwindle away, as will control of our oil, when North sea oil production begins to fall. Irrespective of the tremendous efforts that have been made with discovery and development, we now know that our oil supply will grow much tighter in the 1990s and that we shall be lucky to hold to self-sufficiency — and we shall have less practical control as a result of the Bill. I hope that my right hon. and hon. Friends will join me in Committee in trying to give the Bill more substance and realism, especially with participation oil. Without an agency such as BNOC we shall have far less control over our oil supplies.
The Minister said that BNOC performed several other important functions. I shall not say much about the management of the pipeline as we shall be able to discuss that in Committee, but he mentioned other matters on which I have the right to ask for clarification. When asked about BNOC's role as a tax reference point and helping the oil tax office to tax oil companies, the Minister gave an astonishing reply. It was utterly unclear and contradicted a fundamental statement that he made on 18 December when he said:
We must also ensure that there are some arms length sales at transparent prices."—[Official Report, 18 December 1984; Vol. 70, c. 230.]
He then discussed other options. He must have been asked about the American posted price system, as he said that our market could not be compared to the American one and that we need something like BNOC to act as a tax reference point. We are now told that the oil tax office has been in conversation with the oil companies. How many oil traders has the oil taxation office got? How many people who really know the ins and the outs of the North sea oil regime, who know the score — the fiddles, arrangements, fixes and intricacies — of North sea production and development has it got?
As the Minister said so eloquently on 18 December, BNOC's value was that it relieved the oil taxation office of this sort of operational function. The Bill will lead—I choose my words carefully; those of the Minister were wholly inadequate — to loopholes and certainly tax avoidance.
The oil taxation office will depend heavily on the oil companies' information and published information. After all, I suspect that the authoritative Financial Times oil price statements depend on companies such as BP for their information. This Bill, in seeking to abolish BNOC and thus its role as a tax reference point through its pricing mechanism, will lead to considerable loopholes and tax avoidance, if not abuse.
The basic reason for abolishing BNOC concerns its price fixing and price stabilising role. Apparently, BNOC has failed to prop up prices. That is the ultimate sin in the Government's eyes and the only case that the Minister has made—the other arguments and issues are not affected by price. The Minister validated that in December. The Government's only case is that market conditions between December and March showed them that BNOC was


unnecessary and irrelevant because it was unable to fix and stabilise oil prices any longer. I challenge the Minister to find that that was BNOC's primary function. It never was. BNOC played a role, but fixing and stabilising oil prices was never' its primary function. I find it distasteful that BNOC should be abolished because of its failure to prop up prices at the Government's behest.

Mr. Buchanan-Smith: I have never said that BNOC was used or that one of its purposes was to prop up prices. I said it had a role in a rising or falling market to try to avoid destabilisation. That is very different from the gloss which the hon. Member is trying to put on it.

Mr. Rowlands: We all heard the Minister and the modest disbelief on the faces of his right hon. and hon. Friends says it all. "Stabilising" is a euphuistic word; the Minister meant propping up the price. Indeed, he claimed it as a virtue that, although £65 million was spent in subsidies and grants to BNOC, one can discount most of that because, as a result of the propping up of the price, the Chancellor of the Exchequer collected more tax. I do not think that I have given an offensive or inaccurate description of what the Government are doing. In more ways than one, they actually stated it. The Minister claimed that the subsidy was not in effect very large because, as the price was kept up, the Chancellor collected more taxation and, overall, not much money was lost. Any reasonable person would say that the Government were propping up the price.

Mr. Kevin Barron: I entirely agree with my hon. Friend. Indeed, it was stated in the debate in December that 75 per cent. of what was paid in Supplementary Estimates to keep the prices up was paid back directly through taxation.

Mr. Rowlands: That point was also made in the Select Committee. We can only conclude that the Government were in the business, last summer and again in January and February this year, of attempting to hold up the price—to stabilise it at a fairly high level.
In January and February this year, BNOC attempted to carry out that function not on its own judgment but at the direct behest of the Government. However, because it cannot now carry out that function, it is to be abolished. It is being abolished, the Government say, because, as a result of the apparent oil glut, there is a major shift towards the spot market and away from term contracts. Incidentally, one of the reasons for the flight out of term contracts with BNOC was that the Government would not let BNOC adjust its price in order to keep the contracts.
How permanent will the shift towards the spot market be? Even the Minister, when he made his abolishing statement on 13 March, dared not forecast with any confidence the permanent nature of the market change, even though it is the reason that the Government give for abolishing BNOC. I shall quote the Minister's words without interpretation or gloss. He said:
This trend… is unlikely to be reversed in the near future." —[Official Report, 13 March 1985, Vol. 75, c. 305.]
BNOC is being abolished on the strength of the unlikelihood of another change in a trend in the near future. How spurious and shortsighted can an argument be? Can that be the sole basis and justification for abolishing an oil trading corporation?
No one would deny that there has been a shift in the market, or that it is necessary to adapt to change in market

situations. Did BNOC not wish to do just that in January and February? Did not Mr. Goskirk and his team put to the Government specific proposals to relate the price to the market, and possibly even sensibly to reduce the percentage of participation oil that BNOC was taking? Those were sensible and pragmatic proposals to adjust to the changing market. BNOC wished to adapt to the market, but the Government prevented it from doing so. Scared of OPEC, and afraid of the fiscal consequences of lower prices, the Government asked BNOC to intervene and hold the price for longer than BNOC would have wished to do. BNOC could have adjusted both to price and participation volumes in a sensible and moderate way without destroying its other primary functions. The Government have made an appalling case for abolishing a major national corporation that until last summer had made a profit and to which, even though it was given subsidies and grants, the net payment was minimal.
I hope that the Minister will make a statement about the existing state of BNOC's finances. That was an astonishing omission from his speech. Has the £65 million done the trick? What was the net cost of the Government's intervention in BNOC last autumn and in the first three months of this year?
The Minister says that the Government are abolishing BNOC because it cannot affect the price or act in a stabilising role when the spot market is of such importance. He says that we must not risk a major destabilisation of prices. How will he now stop the price going through the floor? He believes that stabilisation was of vital importance, but now we have no way of combating the growing destabilisation of the market.
The Government enjoyed a good press on the day after their announcement on 13 March. OPEC did not respond. There was no immediate collapse of the price. A cosy glow surrounded the announcement. Last Sunday, and today, the situation did not and does not look quite so cosy. There is great potential for destabilisation of oil prices. The imbalance between capacity, production and demand is so great that destabilisation is quite likely. Nevertheless, the Minister does not have even a fig leaf now. He has made his case for stabilising the price. Whither now that policy? Whither now the price of oil? Whither now the Government's cherished goal of stabilising the prices?
There was no case for rejecting BNOC's modified proposals earlier this year. There is no case for abolishing BNOC on the basis of a trend in the market. It might be abolished for ideological reasons, but not for the spurious and specious reasons given by the Minister. The characteristic of the Government's approach to our oil industry is shortsightedness. The Minister's charm conceals considerable complacency. The Government are complacent and shortsighted about our oil and gas reserves. They are dangerously complacent about the security of our oil supplies. The Bill illustrates that complacency. It destroys our most sensible and practical instrument for ensuring sensible control over the destination of our own oil. The Opposition will vote against it tonight.

Mr. David Howell: I strongly welcome the Government's decision to wind up BNOC and to get out of oil trading on a substantial basis and out of what, for want of a better word, we may call price stabilisation. BNOC was never an effective organisation for stabilising


prices. For better or worse, it may have fallen into a role in which it was believed to be able to make a contribution to price stability, but in due course, as my right hon. Friend has rightly argued, such effect on prices as it had began to tend towards instability.
Conditions in the oil market have changed totally and fundamentally, not just in connection with the move from scarcity to glut but in a structural way, since the early 1980s and late 1970s. We must construct a new policy to deal with those changed conditions. As my right hon. Friend knows—if I may strike one querulous note—I believe that we should have made this decision earlier. Conditions began to change in 1983, and were consolidated by the end of that year and the beginning of 1984. We might have saved ourselves some pain and grief by moving earlier. We could have saved ourselves some difficulties and some public money.
The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) covered the scene with knowledge and experience. He has followed these matters in great detail for a long time. I fully echo the hon. Gentleman's tribute to Mr. Goskirk and his team, who have done a very good job in increasingly difficult and ultimately virtually impossible circumstances. They deserve our congratulations and our full recognition of all that they have achieved.
Looking at the broad picture, I have no doubt that we are right to extricate ourselves from an oil price world scene that is admittedly ugly and will probably get uglier. In the past we were sucked into those difficulties, but now we may be able to stand a little aside from them. Nevertheless, we are bound to be affected because we are part of the world oil market.
My only question about the Bill is why, having taken the decision to disentangle us from the activities of BNOC as a major oil trader and having gone so to speak three quarters of the hog, has my right hon. Friend not gone the whole hog and ended the role of the successor organisation as a substantial oil trader or, at least, as an oil trader on a routine basis? The successor organisation will continue to trade royalty oil. I do not know whether the figure will be 250,000 barrels a day or less because of refunding arrangements. However, it remains an extremely large trading operation by oil trading standards.
The world oil conditions that we face today are completely new and wholly unrelated to anything that we faced six years ago, and I query whether we need to maintain a state oil trading operation of this size. I shall deal with the problem of security of supply about which the hon. Member for Merthyr Tydfil and Rhymney spoke at length shortly. It is quite separate from the question of trading.
To take royalty oil in kind has nothing to do with security of supply. It is perfectly true that in 1979 or early 1980 I decided that we should take royalty from the oil companies, not in cash, which was the previous arrangement, but in kind. At that time we were living in a world of major crises. Indeed, many oil-dry and oil-thirsty countries were in what can only be described as a state of panic. The far eastern buyers from Korea and Japan were ready to enter into contracts at almost any price named by the middle eastern producers under any conditions to secure access to oil. At that time the OPEC countries were producing about one third of the free

world's oil needs. Now they produce much less than half of that. In that crisis atmosphere the decision was taken to take royalty oil in kind.
Those conditions do not prevail today. Of course, it is possible to paint a scene in which the world turns upside down and crises return, and we should prepare to meet that, if it comes. However, I do not see the need to continue with the royalty in kind arrangement. I think that my right hon. Friend the Minister said that that responsibility was to be exercised by the new agency. However, it is the Secretary of State who can decide whether to take the royalty oil in cash or kind. If it is to be taken in kind, we would be left with a small residual body, which could be activated if we ever needed to use the participation agreements again, but which would not be involved in the sizeable trading that is now proposed. I hope that my right hon. Friend or one of his colleagues will tell us why we are leaving the state in the oil trading business in these new conditions.
It is clear that in 1979 the threat of the participation agreements, rather than their practical use, helped to maintain conditions in the United Kingdom oil market, where we could get reasonable security of supply. However, as was said in a previous debate, there were problems. In the late 1970s, in less critical times, the fact that BNOC had entered into agreements overseas to supply oil which it had procured through participation later created rigidities and difficulties at the moment of crisis when we had to unscramble them. The hon. Gentleman's case that we should keep BNOC, not for price stability —I agree with him that stability of price was a function that grew on to BNOC later — but to keep the participation agreements active, with oil flowing in every direction, needs to be considered carefully in the light of our experience of 1979–80. We found that during quieter times too much of that hamstrung the United Kingdom Government and the needs of the United Kingdom market for oil.

Mr. Rowlands: Did not the right hon. Gentleman institute changes to create greater flexibility in BNOC's trading as a result of finding those rigidities and inflexibilities? Does he agree that it is important to have a volume of oil in order to redirect or divert a percentage of it? The smaller the volume of oil, the less chance one has of redirecting or rediverting a percentage of it back to one's own market.

Mr. Howell: I do not see it that way. Under present conditions one does not need to be involved in a large volume of oil trading to influence security of supply. The participation agreements remain on the books, the Energy Act 1976 is on the statute book, and in 1979 and 1980 we spent many days and nights developing the International Energy Agency and European Community trigger agreements. The European Community countries are far better equipped now to cope with the problems of a sudden interruption in oil supplies than they were then. In these conditions we are right to keep the participation agreements, but on the back burner.
It is particularly timely that the United Kingdom should withdraw from involvement in international arrangements to maintain high oil prices because the oil market is in an unhealthy state. Continued dabbling through BNOC and price stabilisation added to that. Although that has now stopped, it does not mean that everything will stabilise. On


the contrary, we shall either see a steady and continuing decline in the international oil industry combined with sagging and soft prices, or a sudden collapse in prices. The latter is less likely than the former. There is about a one in four chance that that could happen.
That position is extremely dangerous. We are in that dangerous position for the simplest of economic reasons: the attempt to keep prices politically and artificially high has, as always, vastly stimulated additional production. Despite OPEC's attempts to keep to its quota, huge new non-OPEC oil supplies have come on stream and vast exploration has been stimulated throughout the world.
On the demand side, those high prices have produced massive incentives to cut demand. All the demand forecasts of the oil industry and of OPEC, even the recent ones of a year ago, have proved wholly wrong. This summer demand increased less than 1 per cent. on last summer, and that was after a year of colossal growth in the American economy. In 1973 the oil industry's forecast for the amount of oil that the world would use in 1985 was 100 per cent. wrong. For every two barrels that the industry forecast we would use in 1985, we are using one. Therefore. demand has fallen dramatically, alternatives have been dramatically developed, and OPEC has continued to produce at a fairly high rate. Although that rate is officially constrained, I have no doubt that a great deal of cheating and leakage goes on, so that all sorts of oil supplies are now swamping and surging into the Mediterranean market and creating a vast production overhang.
The latest developments on the Soviet side have not helped because it is now recycling much more oil into Western markets. Meanwhile we are beginning to realise that if we liberate the natural gas market in northern Europe, there will be a vast upsurge in the use of natural gas. That will undercut falsely priced oil even further. If we follow my right hon. Friend's plans to privatise the British Gas Corporation, as I hope we shall, the corporation, which will remain a large integrated organisation, will pursue vigorously its market strategy and vastly expand demand for its product. We shall see in Britain and throughout northern Europe a far greater incursion of natural gas into the oil market.
All those matters will inevitably create conditions in which the supply and demand of world oil will be in hopeless disequilibrium. As I said earlier, the only question is whether there will be a steady but awkward decline, with the international oil industry fighting to maintain its domination and, paradoxically, by its fighting, losing it, or whether the position will slide out of control completely and cause a major collapse in world oil prices.
In those conditions, we must think carefully, as a substantial oil producer, of how we would cope with a one in four chance of a collapse. We must think realistically about how we will manage our economy in the next 10 years, given that we are moving down from a peak of oil production—although much more gradually than people realise—and that there is an almost continual softening in the price. It is beginning even now. Each month, OPEC makes hopeful statements that oil prices will firm or that real prices will increase. Each month that passes, the opposite happens, and the oil price in spot markets is beginning to slide away to about $25 for Arab light. It will be $23 before long.
The price will probably not collapse, because many international and institutional forces have an interest in trying to prevent a collapse, but the alternative will be a steady downward drift. The projections from the oil companies of ever-increasing real oil prices are completely unrealistic in the new conditions. The domination which OPEC hoped to achieve has slipped out of its grasp, and its contribution to free world oil supplies has fallen from nearly 40 per cent. to less than 20 per cent.
In all those circumstances, it is entirely right that the North sea should stand apart from those developments, although Britain, as a producer and as a nation that relies on substantial oil exports, should prepare itself for the difficulties to come. As long as we were involved, we were blamed. Even now, I notice that as OPEC prepares for the inevitable, which is the next slide in oil prices of a dollar or more in a few weeks or months' time, it is working up the blame machine again. Although when my right hon. Friend announced the demise of BNOC there was remarkably little comment from OPEC, we are beginning to see some cross remarks in the newspapers to the effect that Britain is over-producing, has removed BNOC and is generally undermining the position. That is nonsense. We are not undermining the position; it has inherent undermining qualities built into it, which will remain until and unless OPEC and, to some extent, the international oil industry recognise the need to respond to market forces and allow oil to settle down again as a relatively low-cost source of energy in the world economic system. They damage themselves vastly by talking about how oil will be incredibly scarce, and the dangers and costs of production. The more they talk about scarcity, the more everyone designs oil needs out of their equipment — in everything from screwdrivers to sky scrapers. Therefore, the need for oil is gradually being designed out of the economic and industrial system.
That is the pattern, and I believe that we should stay well clear of it. My only sorrow is that our example has not been followed by the wiser minds in the middle east and other oil-producing countries, especially those in OPEC, which have not allowed market forces to enter the scene.
Conditions now are completely different from what they were in 1979. The pattern of oil production has changed radically, as has the pattern of demand In those new conditions, we are right to adjust our policy, and I welcome what the Minister of State has done. Finally, I repeat that my only query concerns why we must remain in the oil trading business on a large scale at all.

Mr. Bruce Millan: I will not follow the forecasts of the right hon. Member for Guildford (Mr. Howell) of what is likely to happen in the longer term to world production of and demand for oil, but I think that he is being remarkably complacent if he assumes that there will be no supply crisis in the future. I do not believe that that is the view of the Government, who are much more cautious in this matter, and who claim that the safeguards still available to them for security of supply are adequate. They do not argue that we need no safeguards. It would be an incautious and unwise Government who did not operate on the basis that we need safeguards, but I shall return to the security of supply later.
If the price of oil drops in real terms in the next five or 10 years, and even more so if it collapses, it would have


serious implications for the United Kingdom economy. In 1985–86, apart from all the other considerations, such as the balance of payments and employment, the Government are assuming £,13·5 billion in terms of tax receipts from North sea oil. Since 1979, the Government have been fortunate in the vast revenues that have come in from North sea oil. The great tragedy is that that revenue has been largely squandered. The right hon. Gentleman will agree with me on that. Our manufacturing industry has been debilitated since 1979. The Government constantly assure us that the economy is moving forward at a satisfactory rate, yet we have appalling unemployment, which is getting worse rather than better.
All this has happened in a period when we have had the uncovenanted advantage of North sea oil. The Bill is another example of the Government withdrawing from the oil business and abandoning any attempt to ensure that the industry is managed, developed and controlled in the national interest. The only interest of the Government—this is not irrelevant to what the Minister said—is to get production up to the maximum as quickly as possible for short-term financial advantage to the Exchequer. The Government do not have a depletion policy. In terms of security of supplies and the long-term future of the economy, the potential of North sea oil is being wasted.
The Bill is an example of withdrawing from the oil business, handing it over to private enterprise and assuming that, somehow or other, the national interest will be safeguarded. We can be sure that the national interest will not be safeguarded, because the oil companies, even in a crisis, are torn between their loyalty to the Government and their commercial interests. Experience has shown that commercial interests dominate their activities in a period of crisis.
My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) made an excellent and comprehensive speech. The case that he put is unanswerable. The arguments of the Minister of State were not convincing, especially when so many of them contradicted his arguments in the debate in December and in his evidence to the Select Committee on Energy in March. They changed the day the Government announced the abolition of BNOC.
As my hon. Friend the Member for Merthyr Tydfil and Rhymney said, the Government's only case for the abandonment of BNOC is the changed circumstances of pricing. But that was never the primary purpose of BNOC. I hope that the Minister will attempt to answer the points that my hon. Friend made — although I believe those points to be unanswerable.
I am glad that the Minister said that the paper losses of BNOC over the past few months were no reflection on the competence and excellence of the BNOC staff. It is extraordinary that we are winding up an organisation that is constantly receiving these encomiums from the Government and everybody else for the excellent job it does.
On pricing, BNOC was operating under Government direction, as the Minister eventually, and reluctantly, agreed. If there were paper losses, they did not arise from the inefficiency of BNOC or policy decisions taken by it in the national interest. In fact, they arose from decisions

taken by Ministers in what they considered to be the national interest — I do not seriously dispute their attitude to that.
I am not a member of the Select Committee, but I have read the report and it is difficult to understand what the Government were up to in that period. Was it an attempt to maintain the stability of prices for stability's sake, or were they concerned with the fiscal implications of a drop in oil prices? I suspect that the second consideration was rather more important to the Government than the first.
Included in the report of the Select Committee on Energy is a memorandum from the Department of Energy. It is speaking about the second half of 1984 when, despite the so-called losses, there was a net gain to the Exchequer from the way in which BNOC was operating under Government direction. The Department of Energy said in February:
In the particular circumstances in which BNOC's losses were made last year, they were more than offset by a higher level of tax revenue than would otherwise have been the case. That is because
(i) suppliers of oil to BNOC at the term price pay tax on that price. The average marginal rate of taxation is over 75 per cent. In circumstances where BNOC is able to sell more than approximately 25 per cent. of its oil at term prices, therefore, its losses on its remaining sales at lower spot prices will be less than the benefit to the Exchequer of suppliers to BNOC paying tax based on the higher term price. Those circumstances obtained throughout the second half of last year.
There was some financial sense in what the Government were doing in their directions to BNOC to prop up the price, which is what they were doing, despite all the talk about stability.
Labour Members accept that BNOC cannot prop up prices in this artificial way indefinitely, and perhaps should not do so at all. It was never the function of BNOC to operate in this way. Though I find it difficult to accept the proposition that this country, the fifth largest producer of oil in the world, has no influence on world prices. That would be an abandonment of responsibility. Again, the Government have not come clean on this.
It is difficult to understand exactly what the relationships are with OPEC and what discussions the Government had with OPEC and other countries. One of the major oil companies, Shell, in the memorandum that it presented to the Select Committee on Energy, took the view that BNOC could influence the world price of oil, although obviously this is one of many influences. I should not for one moment argue that BNOC's influence could be anything like the influence of the decisions, or non-decisions, of OPEC on either price or production.
Even if the circumstances of pricing had changed, that is not a case for the abolition of BNOC. There is no reason why BNOC could not operate on the basis on which it was operating before the Government asked it to prop up prices artificially when it did respond to market conditions.
It is extremely foolish and dangerous to say that, because circumstances have changed and present conditions are as they are, that will continue for ever, so there is no need for this organisation, even for pricing. However, the argument is not basically about pricing, although that is an important consideration. Security of supplies is bound to be the main consideration. Until recently not only was that not disputed by the Government, but they argued strongly, as my hon. Friend the Member


for Merthyr Tydfil and Rhymney said, for the necessity to maintain BNOC for the sake of security of supplies in possibly dangerous situations.
We know that, under the Energy Act 1976, certain arrangements can be made only in a dire emergency. We are talking about a state of emergency being declared before the British Government, under the Energy Act, can take certain measures. Other measures can be taken under EEC arrangements and International Energy Agency arrangements, about which the Minister has spoken today.
The Minister's case was ludicrous. First of all, he spoke about reactivation of participation agreements. Perhaps the Minister will answer the point made by my hon. Friend the Member for Merthyr Tydfil and Rhymney about the requirement of six months' or 12 months' notice to reactivate the participation agreements. Are we assuming that we shall get notice of a crisis six or 12 months in advance? That has never happened before in this sector or any other sector of political and economic activity. Reactivation is not a satisfactory safeguard compared with the present arrangements under which BNOC is trading in participation oil on a massive scale. Our position is bound to be weakened if a crisis short of a declaration of a state of emergency should arise.
As to informal assurances from oil, product or marketing companies, I am sorry, but I doubt very much whether they are worth the paper on which they are written—if indeed they are written at all. Even that was not clear from what the Minister said. If they are not legally binding but are rather more than general expressions of good will, no doubt we shall get further information in the winding-up speech or in Committee. However, it is not sensible, on a matter of such importance, to rely on informal assurances from product or marketing companies in the oil sector.
It is a dereliction of duty on the part of Government to rely simply on such informal assurances. I had a limited experience at one time of the difficulties of oil supplies. Although my interest was marginal compared with that of my right hon. Friends, I did not as a Minister find the oil companies particularly helpful or accommodating. I have no reason to believe that they would be any better in the future than they were in the past.
Similar questions arise about taxation. We are talking about massive sums of money. If things go wrong, there will be a considerable loss to the Inland Revenue. The Minister acknowledged that it had been useful to have BNOC as a reference point in determining the appropriate prices for taxation arrangements when one was dealing not with arm's-length arrangements but with arrangements in which artificial pricing is commonplace. Artificial pricing is arranged in a way that benefits not the Inland Revenue but the potential taxpayer.
The fact that BNOC is involved in trading on a massive scale is bound to be of considerable benefit from the point of view of the oil taxation office. It contains a wealth of knowledge and day-to-day experience which will be lost if and when the Bill is enacted. BNOC is trading in many different brands of crudes, so the office has a yardstick by which to judge the market price. The price at which BNOC sells and, in certain circumstances, buys is the going rate. The major oil producers are also refiners. Therefore, they have an interest in depressing, for taxation purposes, the price of crude oil. It is on the crude price that the marginal rate of tax bites very heavily.
All the major oil companies have oil taxation departments staffed by highly skilled, professional people, many of whom are accountants. They are very well qualified to look after the interests of the oil companies. I do not criticise the oil taxation office when I say that, unless it is provided with information from inside. it cannot compete with that level of expertise. It can obtain that information now from BNOC, but in future it will be unable to obtain information on anything like the same scale, and after the royalty oil has run out it will be unable to obtain any information.
We are referring to considerable sums of money. If the price of oil is reduced by 1 per cent., the Exchequer will lose revenue amounting to £150 million. A 1 per cent. fiddling around with transfer pricing or a 1 per cent. difference between the reference price that the oil taxation office, properly informed, applies now and what will be applied in the new circumstances involves a considerable sum of money.
The Minister of State said that this matter will be taken care of because the Government will talk to the oil companies about it. How naive can one be? The oil companies are on the other side. They are, as they are perfectly entitled to do, looking after their own interests. Nice chats with the oil companies will not solve this problem. As recently as December 1984 the Minister acknowledged in a debate the worth of the BNOC.

Mr. Rowlands: I am grateful to my right hon. Friend for allowing me to intervene. I wish only to underline his point that in 1984–85 petroleum revenue tax yielded an estimated or provisional £7·2 billion, while corporation tax yielded another £2·4 billion. Therefore, the odd loophole or slip-up in taxation could mean the loss of tens of millions of pounds, not just a few million pounds.

Mr. Millan: Yes. In that context we are dealing with the abandonment of an organisation which now employs 120 people. When the Bill is enacted it will employ only 40 people. These people are involved in a great many activities, all of which were profitable until the Government interfered with the pricing mechanism. Even that, from the overall national point of view, benefited the Exchequer. We are dealing with a small organisation that is operating in an area of activity where, if things go wrong, the Government can be taken to the cleaners for very large sums of money. It is astonishing that we should be debating the abolition of BNOC, for the reasons given about price changes, when all these other activities are of such immense advantage and importance to the country and the Exchequer.
I am a member of the trade union which is principally concerned with the staffing of BNOC—the Association of Professional, Executive, Clerical and Computer Staff. I was glad that the Minister of State referred to the fact that there had been a meeting with the general secretary of APEX, Mr. Grantham, at which I know certain assurances were given. However, the announcement came as a bolt from the blue.

Mr. Buchanan-Smith: indicated assent.

Mr. Milian: The Minister of State is acknowledging that fact. There was no reason for the staff to believe that BNOC would be abolished. BNOC was recruiting up to the day of the announcement. Some of the staff have not been with BNOC for very long. They were recruited to


work for what they believed to be a developing organisation with a long-term future. Therefore we must make sure that the staff are dealt with very generously.
As my hon. Friend the Member for Merthyr Tydfil and Rhymney has already said, members of staff must be given freedom to decide whether they wish to be transferred to this much truncated and mutilated agency. It will have considerable difficulty, for obvious reasons, in attracting the highest quality staff. Its functions are to be severely reduced. Its oil trading functions will disappear completely, unless participation agreements should be reactivated. If such agreements they every were, it is probable that nobody in the new agency would know how to trade in oil. I do not wish to deal in detail with the provisions relating to pensions, but those Opposition Members who will consider the Bill in Committee will wish to ensure that staff are dealt with fairly and generously, particularly bearing in mind the unexpected nature of the announcement about the winding up of the BNOC.
In conclusion, I repeat what I said a few moments ago. In the light of the various statements made by the Minister almost up to the date of the announcement, it is astonishing and extraordinary that the Government should be about to abolish the BNOC. It is a tragedy that an organisation which has done an extremely worthwhile job for the country is to be abolished. The national interest will be put at a considerable disadvantage.

Mr. John Hannam: In his speech the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) beat his breast, called for pragmatism and then went on to deliver a speech which demonstrated a total ideological commitment to the continuation of another state interventionist body. I do not criticise him for that; he has always stuck to that approach. The right hon. Member for Glasgow, Govan (Mr. Milian) implied that the only way in which some degree of control can be maintained over the oil industry—he did not use the words "the wicked oil industry", but that was the phrase used in years gone by — is through some form of British National Oil Corporation. The Department of Energy, through the powers that it wields by means of the licensing rounds, exerts a very much greater degree of control and discipline. The threat that participation agreements might be reintroduced would bring to heel any oil company that was thinking of trying to get round any form of taxation. Therefore, the right hon. Member's arguments are irrelevant in the context of this Second Reading debate.
When the House last debated the role of BNOC on 14 March 1985, the only Opposition Front Bench spokesman who was present was the hon. Member for Merthyr Tydfil and Rhymney. This is surprising, in view of the outraged indignation of the Opposition the previous day when my right hon. Friend the Minister of State announced the abolition of the BNOC. Someone referred to it being a fight involving tooth and nail. I do not know whether the hon. Gentleman would class himself as the tooth or the nail.
The fact is, as my right hon. Friend the Member for Guildford (Mr. Howell) has made clear, the Government are now right to call an end to the expensive game of playing with world oil prices. I am one of those who have

in the past given qualified support to the role of BNOC as a price stabilising force and a means of ensuring a degree of security of supply to Britain in the event of a crisis. In my speech in the debate on 18 December I referred to the ever-present possibility of such a crisis of supply and I mentioned in particular the Iraq-Iran war as a potential threat. I also mentioned the coal dispute and our dependence on the much higher oil-burn in our power stations. It was the security of oil supply rather than the trading influence of BNOC which attracted my guarded support, and all the evidence of recent months points to the irrelevance of that trading role.
When spot oil prices were rising in the period up to spring 1983, BNOC was able to establish a good reputation as a shrewd trader in the volatile spot market following the Iran revolution. But when prices began to fall dramatically it became obvious that the role of BNOC in trying to set marker prices for oil had become impossible and large losses developed. The effect on oil prices of BNOC's intervention became less obvious. In my speech on 18 December I said:
I do not believe that BNOC or the Government have any illusions about their power to determine or influence oil prices in other than the most limited or marginal way."— [Official Report, 18 December 1984; Vol. 70, c. 221.]
I said that the BNOC price card could be used only occasionally and with diminishing effect as we moved from contracted sales to a large spot market. It is interesting, looking at the figures, to see that the spot market has increased from 500,000 barrels a day in 1979 to over 6 million barrels a day in 1984.
Therefore, I do not mourn the passing of BNOC's increasingly ineffective role. Indeed, looking at recent events, where we see a continuing shift from contract oil sales to the spot market as a sign of things to come in what everyone would agree is an oil surplus world market, I can foresee the continuation of those particular pricing problems. I welcome the Government's decision although I pay tribute to the work of the BNOC's staff during a difficult trading time.
It is with security of supply that I want to deal tonight. When I served on the Committee dealing with the original Petroleum and Submarine Pipe-lines Bill in 1975 with my right hon. Friend the Member for Guildford, the argument deployed by Conservative Members, who were then in opposition, was that we did not need the extensive BNOC interventionist role in the North sea. We argued for the combination of a proper tax regime and some kind of mechanism for ensuring security of supply in the event of an emergency. We did not support the creation of a vast BNOC organisation.
That is where we finish up again now. I fully accept the assurances of my right hon. Friend the Minister that security is and will be maintained through agreements with the refining and marketing companies because they are the companies which supply the British customer. I also agree with the hon. Member for Merthyr Tydfil and Rhymney that it would be extremely useful for us to have more detail of those assurances because that would satisfy the House.
I welcome the assurances of my right hon. Friend the Minister and also his explanation of the powers contained in the Energy Act 1976. It ensures that over two years stocks of oil will be maintained if an oil supply shortage of some 7 per cent. develops. I understand that that has


never happened and is unlikely to happen, but it is a precaution which can be triggered in the event of a world crisis.
As I understand it, the agency will still handle royalty oil of some 250,000 barrels a day and will retain the right to buy up to 51 per cent. of all North sea production, but only, as it says in the Bill, if there is some threat to the security of our United Kingdom oil supplies.
I would be grateful for more information on the definition of that threat to United Kingdom oil supplies. Who will decide what triggers off that threat? The International Energy Agency deals with world situations which became patent and easy to determine. What happens when there is a threat to the United Kingdom, not of the magnitude of a world crisis but which necessitates some action being taken to put into effect the assurances which my right hon. Friend the Minister has proclaimed we shall have from the oil trading companies and refineries? We need to know who will decide the nature of that crisis if we are concerned about security of supplies. Will it be a Cabinet decision based on advice from the Department of Energy or through consultation with a specific oil industry committee or association?
With regard to royalty oil, the agency has, I understand, the power to sell the 250,000 barrels a day or to contract out the selling. Under what circumstances would it choose between those two roles? How and what would influence its decision?
On 14 March my hon. Friend the Member for Enfield, Southgate (Mr. Portillo) expressed reservations about the retention of that royalty oil. My right hon. Friend the Member for Guildford also mentioned that. I, too, would like a little more explanation as to exactly why that power is being retained for the agency, and also about the continuation of participation agreements. As has been pointed out, they take a long time to spark off. In the event of a crisis, the mechanisms would take some time to take effect. I would concede that more direct means of securing oil supplies for Britain would be used. In fact, we have seen that done by other European nations. In the 1979 crisis we seem to have produced longer queues and greater shortages than anywhere on the Continent where more direct methods were used. I suspect that that will happen again unless we are clear how to ensure supplies to the British consumer.
The fact that we had BNOC in 1979 does not convince me that BNOC is the answer to security of supply. The Continental countries used their own more direct methods of ensuring that they got supplies to the consumer. However, I am not over concerned about the retention of those powers in the Bill. If they help to secure all-party support for the Bill, that is fine.
We live in an uncertain world with regard to energy and oil supplies. As has been pointed out, prices are on the slide again and, with OPEC increasingly unable to control its members' production levels, the short-term points to slack demand and a glut of oil. That should mean lower world energy prices and a falling dollar, both liable to benefit world trade and to create jobs. However, that will not necessarily help the oil-producing countries. We already see strains developing in OPEC with wild accusations being leveled at countries such as ourselves and Norway for maximising our production.
If we look a little further into the crystal ball — a dangerous thing to do in relation to energy — we see both Russian and American oil production beginning to

turn down. The United States has produced some recent estimates of recoverable reserves which show a steep downward trend. In fact, the estimates of offshore oil reserves are now 55 per cent. lower than the 1981 estimate of offshore oil in the United States. The Alaskan reserve estimates have now dropped even more dramatically and are 73 per cent. lower than in 1971 following a succession of unsuccessful exploration wells.
At some time in the future, probably still a long way ahead, we may be heading back to the inevitable dependence once again on middle east oil and all that that entails. Those considerations must be borne in mind when planning Britain's future. The world will still be dependent to a large extent on oil, but the limited duration of the levels of consumption that we are used to will become more obvious. In that context, I believe that we need to maintain this agency with its limited security of supply powers. I believe that we are right to take the steps that we have to remove once and for all the farce of the oil trading pricing which has caused such losses to the British taxpayer.
I fully support the Bill, and I hope that the House will give it a Second Reading.

Mr. Malcolm Bruce: In one sense the announcement of the Bill was a surprise, but in another sense it was not. I have been looking back to what said on 18 December 1984 about the confusion that reigned then within BNOC:
I suspect that people working at the British National Oil Corporation have even less idea what the Government's policy is and are being left in confusion about what is being expected of them."— [Official Report, 18 December 1984; Vol. 70, c. 209.]
I suppose the only good thing that they can say about the Bill is that at least they are no longer in confusion, but unfortunately some of them are left looking for alternative employment.
It is logical that, having emasculated the integrated state oil corporation and attempted to use BNOC in a way that, as hon. Members on both sides of the House have acknowledged, it was never intended to be used in the first place, the Government have decided to get rid of the embarrassment of BNOC finally and for all and simply replace it with an agency. In the context of other things that the Government are doing, I find that slightly ironic. The Government most of the time seem to be trying to suggest that Government agencies should be transferred to public corporations, whereas in this case, for obvious reasons, they are having to do the reverse.
Once the Bill goes through, either a vacuum or an opportunity will be created. I suggest to the Minister that it is time the Department of Energy took advantage of an opportunity rather than continued with the present state of drift. I do not think that I am the only person in the House or outside who remains puzzled as to exactly what Government policy is in the context of further development of the North sea and, indeed, North sea oil production and pricing.
Let us first consider oil pricing. The general contention in the debate is that we have a glut, a soft market, and that the price of oil is falling. It is down to about $25 and, depending on how optimistic or pessimistic one is, it could well drop below $25. The Government's response to that apparently is: "That is the way things happen, it is nothing


to do with us, we will just have to live with it," even though a few months ago they were clearly using BNOC at least to try to offset some of that effect.
It is a little naive for a country that produces 2·8 million barrels of oil a day to suggest that we have no influence on the market price. I freely accept that we are not the major influence, but it is absurd to continue to suggest, as the Government do, that there is no influence that the Government or the United Kingdom can have on the market price.
It is interesting to note in the context of OPEC that it has long been recognised that helping to determine prices cannot be separated from production. It would be nice to hear from the Government some coherent idea of what in their view North sea oil production is, could be or should be.
Perhaps I should remind the House that there was an agreement some years ago, when we were building up the production of the North sea, that we should aim for self-sufficiency. It was not a particularly scientific objective or one that was worked out on the basis of a great debate, yet a sort of consensus emerged that we might just as well go for something like self-sufficiency.
We are now producing 2·8 million barrels a day, something like 30 per cent. more than our domestic consumption. This is way past the original objective. We have gone through this figure without any reassessment of what we are doing or why we are doing it, and it appears that we are continuing to do so.

Mr. Michael Portillo: Is the hon. Gentleman advocating that we should now cut our oil production? Is that official Liberal party policy?

Mr. Bruce: I certainly think that we should be considering whether 2·8 million barrels a day of maximised oil production is in the best long-term interest of the nation. I freely admit that the Liberal party and the Social Democratic party are discussing whether some constraint on production would be sensible in the national interest. That is not a definitive statement of policy—it is not determined—but we think that it is an important question, and one to which the Department of Energy should address itself but has so far refused to do so.
The third item which has been much discussed is security of supply. The argument appears to be that we have a surplus of production, that supply is not a major problem and that therefore there is no need for any special measures. I accept the point of the hon. Member for Exeter (Mr. Hannam) that, in an emergency, legislation may be necessary rather than a long participation agreement. However, the Government cannot simply argue that, because the existing set-up does not provide adequate protection, they will get rid of it with no clear alternative. What we heard from the Minister of State was less than satisfactory. Some of his assurances were less than specific, and may or may not be valuable when the crisis comes.
It is not inappropriate, in suggesting that it is time for the Department of Energy to grasp some of the opportunities, to recognise that we have gone for a level of production in the North sea and that we have achieved that level. No hon. Member would wish to decry the considerable achievement by all those who have been involved in getting that far, but it is accepted that the

investment in the industry in the next 15 years will exceed the total investment to date in the North sea since the first well was drilled. One wonders, observing the attendance in the Chamber and in the Strangers' Gallery, whether the nation is aware of the opportunities that still exist and whether the Government are failing in their duty to point out the scale of those opportunities and, indeed, to try to ensure a greater British involvement.
It is a matter of deep and continued disappointment to me that major companies such as ICI and GEC fail to have a significant stake in the technological development of the North sea and the opportunities that that brings. I should like to think that companies with substantial cash mountains might use them to increase our involvement in the technology in the industry.
Once the Government have swept away all the things that they have inherited from the Labour Government, which I understand they dislike for ideological reasons and want to see the back of, they should recognise that they have created a situation which is unlikely to be in the best interests of the United Kingdom market or, indeed, of the United Kingdom consumer. They have created a vacuum into which it is time they made a positive input. The accumulation of what the Government have done in the last five years suggests that they have a policy not to have a policy. Effectively, they are drifting about aimlessly without coming up with a constructive idea on how to ensure that, in the next 15 years, Britain's interest in pricing and production of our energy resources is maximised, with the maximisation of the industrial opportunities that arise therefrom, in a way that regrettably has not occurred in the last 15 years. [Interruption.] 
I hear groans from a Conservative free marketeer, off stage, as it were. Nevertheless, I suggest that the Government should recognise that producing at the rate that we are doing, without taking account of the need to assess our national interest, is not a very responsible thing to do. Many people would recognise that it is not the Department of Energy that is running our energy policy; it is the Treasury. Indeed, there is a short-term objective to maximise oil production in order to get revenues to meet the short-term needs of the Government's public sector borrowing requirement and, indeed, perhaps their taxation measures.
If that is the case—I think that many hon. Members believe that it is—it might be more honest to admit it. I do not believe that that is the best long-term objective for the country. We need further sensible development. It is a balance, and I freely accept that we want to ensure that the market operates as effectively as it can. But we are not so naive as to ignore the effects of OPEC or of our production and our ability to influence price, and nor are we so naive as to fail to recognise that the Government could and should be doing considerably more to ensure that there is a reasonable policy.
The Government are sweeping away the last vestiges of what they inherited, but they have offered no alternative policy other than the free operation of the market — something that many people recognise is not, on its own, sufficient to ensure the best interests of North sea oil.

Mr. Gerald Bermingham: Does the hon. Gentleman agree that the Government's policy can be likened to that of a farmer with a barn full of corn, who, instead of planting some of the seeds for next year's crop, decides to sell the lot?

Mr. Bruce: I appreciate the point of the hon. Gentleman's intervention. Indeed, I was about to make the link to substantiate my point about Treasury domination of the Department's supposed strategy or lack of policy. The Department announced last week that it would sell British Gas at a yield of about £6 billion to £9 billion. For a Government dominated by someone who gives us homilies about good housekeeping, to do that simply to sustain current expenditure is not responsible.
The Government's objective is to maximise production from the North sea, not because it is the best policy in the long term, not because the price is right to get the best return, and not because it will provide the maximum opportunity for British industry to become involved—reasons that might be defensible—but simply to produce revenue to sustain the Government's economic strategy. It has nothing to do with good energy policy or good management of resources.
We should reconsider the production level and look to the next 20 years. We should take the opportunity to ensure that production is paced at a level that gives the maximum long-term benefit to the United Kingdom economy and the maximum long-term opportunity to British industry. There is no evidence that the Government propose to do that. While we can understand the purpose behind the Bill, the Minister should recognise that, if he does nothing but produce it, he will create a vacuum. He should take advantage of the opportunity provided.
My hon. Friends and I feel that this tidying-up operation might as well be completed, but only because of the way the Government have gone about it. The Labour party is, to some extent, defending something that it created, but which has outlived its full usefulness—

Mr. Peter Hardy: Why?

Mr. Bruce: Because of the steps that the Government have taken and because BNOC's record in recent months has shown that it cannot fulfil a considerable function, given the Government's constraints.
If the Government think that they can get away with abolishing BNOC and carrying on with their policy of not having a policy, the people of this country will recognise that they have squandered the only asset that stands between us and bankruptcy and have failed to take advantage of the long-term opportunity that it should and could present both for the economy and for industrial opportunity.
I urge the Minister to look beyond the Bill and give us some indication of how he sees the way forward to ensure a sensible, positive energy policy—something which, I regret, he and his colleagues have never attempted to bring before the House.

Mr. Peter Rost: Having listened to the hon. Member for Gordon (Mr. Bruce), I confess that I am more confused than ever about Liberal party policy. His speech criticised the Government for not having an energy policy, and I pricked up my ears and hoped that he would offer us an alternative policy—but nothing materialised. He offered only some rather vague views about the need to limit oil production in the interests of the British economy. He gave no specific reasons why that should be done and how best to do it.
I spent last weekend yet again offshore—this time looking at some of Britoil's operations in the Moray Firth

and the Beatrice field—and saw some of the enormous economic benefits that have spread throughout Scotland, both onshore and offshore, as a result of the enormous investment that continues to take place. I should be surprised if there were many citizens north of the border who would welcome any artificial Government intervention to curtail development or, even worse. to cut production of existing fields.
To suggest that displays an extraordinary lack of knowledge of the economics of the oil industry. Long lead times are involved in developing a field, and once the investment has been made it is necessary to get back that money quickly if the company is to stay alive and if it is to build up the cash required to make preparations for the next investment. The country cannot afford a policy of depletion that would delay development of the smaller marginal fields, which are primarily the reserves still to be exploited. We cannot afford any hold-up or disincentive that would prevent investment in fields that will be marginal in reserves and profitability.
If that is what the Liberal party is suggesting, it will not only be extremely damaging for the offshore supply industry and all the employment and economic wealth that that creates, it will not only be extremely damaging for the oil industry itself, it will be disastrous for the economy and for the revenue from oil at a time when we must survive a major structural reorganisation in our society. We are faced with huge unemployment that has resulted from our not making ourselves more competitive and thereby not competing effectively with a world that has already developed the high technology industries that we are still trying to develop.

Mr. Bruce: The hon. Gentleman is suggesting that there should be no depletion policy until we begin to run down production. He is implying that the maximum production objective of the oil companies is automatically in accord with the national interest. He must acknowledge that many of the fields have had the full capital return, so most fields could handle a small cut in production. However, I agree that the new fields must be encouraged.

Mr. Rost: I am not prepared to argue that there is not some case for what the hon. Gentleman calls a depletion policy. However, the Select Committee considered that a year ago and did not reach that conclusion. It decided that we do not know whether we need a depletion policy because we do not know the extent of the reserves. The first objective must be to explore more thoroughly the extent of the reserves before we decide whether we need a depletion policy.
It is all very well to say that we must conserve oil because we might need it in 20 or 30 years — which would be a valid argument if we had only 20 or 30 years of reserves — but we do not know the extent of our reserves. We have licensed only about 10 per cent. of the acreage. There are large areas of potential oil-bearing acreage, some of which is coming out in the ninth round, but a great deal of which is being hoarded by the Department for future licensing. Until we have a clear assessment of reserves, and until the annual books on reserves begin to take a more comprehensive view as a result of more thorough explorations, we just do not know our reserves. Even with modern technology, we cannot know until we have drilled exploratory wells. There must be a great deal more drilling before we have the answer.


I agree with the hon. Gentleman that, at that stage, if we find that there is nothing much left there may be some justification for a depletion policy. If I pursue this theme, Mr. Deputy Speaker, you will no doubt rule me out of order.
The purpose of my contribution was to welcome the Bill and to express perhaps a little disappointment that Opposition Members have made rather spurious arguments about security of supply their main objection to the Bill. I want to deal with some of the laboured and unconvincing points put forward by Opposition Members, particularly the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands). He made heavy going of the argument about security of supply, if I may say so without disrespect to him because I admire his depth of knowledge and his contributions on these matters. I have learnt a great deal from him in my humble efforts to gain an understanding of this difficult subject.
Reference has already been made to the power that the Government have under the Energy Act 1976. Therefore, it seems strange to suggest that there is any risk to security of supply in an international emergency when, so far as I am aware — I have considered many offshore installations and platforms—the pipelines come to the United Kingdom and do not go anywhere else. Therefore, it seems absurd to try to argue that we would be in danger of losing supplies in an international emergency when the stuff has to be landed in the United Kingdom.
Of course, we export oil but it comes to the United Kingdom bases first. Some of it is moved direct from the oil platforms into tankers, but very little. Most of it comes by pipeline to bases such as Sullom Voe and it is from those bases that it is shipped abroad. The logistics make the Opposition argument ridiculous. If we were faced with an international crisis with a potential shortage of oil, I cannot see that we would be in danger of losing the supply because it has to be landed here anyway.
Even if the oil companies were not prepared to be co-operative—a ludicrous argument in itself—the logistics are such that the Government could easily use whatever force was required to insist that the oil landed here stayed here, even if there was not time for legislation.

Mr. Barron: In regard to the landing of offshore energy assets, does the hon. Member think that we should not alter the position whereby all energy has to be landed in this country before it can be exported?

Mr. Rost: I do not follow the point that the hon. Member is making. If he is suggesting that all energy should be landed in this country before it is subsequently exported, I cannot see the relevance of that argument.

Mr. Barron: To be more specific, does the hon. Member think that gas and oil from the United Kingdom continental shelf should be landed in this country before they can be exported?

Mr. Rost: That is the hon. Gentleman's argument. It is his party that says that we need security of supply. I do not accept the argument that all reserves from the United Kingdom shelf should be landed in this country first because I do not regard it as essential to do that to secure adequate supplies, as we have a surplus. In any case, most of it is landed here; it has to be landed here simply because it is marketed in this country.

Mr. Rowlands: Can the hon. Member tell us what piece of legislation, other than the Energy Act 1976 which includes the last-resort power of declaring a national emergency, allows a Government to ban the export of oil? So far as I know, the United States has a law forbidding the export of oil, but we do not. If the hon. Member is saying that the best way to secure oil supplies is to land them here and have legislation which allows the Government to stop them being exported, we can discuss that, but we do not have such a law, as the hon. Member knows.

Mr. Rost: If the hon. Member had allowed me to develop my argument, his intervention might have been irrelevant. To give him an immediate response, I am not sure what sort of catastrophe he visualises, but he has been here much longer than I have and surely he knows that in an emergency the nation unites and even opposite parties unite in Parliament. It would not take many minutes or hours for the necessary legislation to be passed as emergency legislation. It has been done before. There would be a consensus on such an issue. In that extremely hypothetical case, if it were felt that the oil companies could no longer be trusted to keep the oil in this country, emergency legislation could be introduced quickly.
The hon. Member's heavy-going argument about security of supply was also nonsensical because surely he knows that we import a high proportion of the oil that we consume. We import heavy crude, mostly from the middle east, because it is more suitable for burning in power stations and for some of our oil refineries. We export the bulk of our high quality North sea oil. There is an enormous two-way trade. Therefore, it is nonsensical to argue that we need our own oil for security of supply when basically we depend upon continued imports from the middle east. If those imports were to be shut off, it would be undesirable for us to export our own oil, but in the meantime our supplies depend upon the two-way trade. That point should be borne in mind.
The hon. Member for Merthyr Tydfil and Rhymney made a valid point that I support —

Mr. Rowlands: I am surprised if that is the sum total of the great demolition job that the hon. Member wanted to do on our arguments. If we do not need BNOC to ensure security of supplies, why does a vehement privateer and free marketeer such as the Chancellor of the Exchequer accept that argument? He accepted it when supporting the Oil and Gas (Enterprise.) Act 1982. As well as being my view, it was the view of the Chancellor of the Exchequer.

Mr. Rost: The hon. Member has again jumped the gun. I was just about to support his argument in his speech this afternoon, even at the risk of embarrassing my own Front Bench. I was about to say that, while the hon. Member did not have a strong argument for saying that we need BNOC in its old form to ensure security of supply, he had a powerful argument when he reminded the House that Ministers, particularly my right hon. Friend the Minister of State, who opened on behalf of the Government, as late as last December were arguing that we need BNOC to maintain security of supplies. I do not want to embarrass my right hon. Friend by quoting evidence that he gave to me and several others on the Select Committee on Energy as recently as last December.


However, I will quote him, not to embarrass him but because I wish to develop the point. I asked my right hon. Friend:
Do you believe BNOC has an on-going role to maintain security of supply?
He replied:
Yes, I do.
Later, in reply to a question from the hon. Member for Rother Valley (Mr. Barron), my right hon. Friend said:
BNOC has a very important role in relation to participation agreements and in relation to security of supply. Therefore, I believe that there are important and continuing functions of BNOC.
I appreciate why my right hon. Friend's view has changed since December. Perhaps he has not convinced Opposition Members in the way that he should of the need for that change of view. He might tell them, for example, that circumstances have changed considerably since December. If he wishes to persuade Opposition Members of his need to change his view about the future role and usefulness of BNOC, he need only give more credit to the Select Committee than he gave today. Although my right hon. Friend was generous about the two Select Committee reports on BNOC, he might have 'said that the Select Committee had been instrumental in allowing him to see more clearly that BNOC had become irrelevant. I am sure that hon. Members in all parts of the House would then readily acknowledge that only outstanding Ministers have clarity of vision.
It would be an ideal opportunity for my right hon. Friend to get out of what some might suggest could be an embarrassing spot, bearing in mind the quotations that could be thrown at him from as recently as last December, when he was doing his best to justify the continued existence of BNOC — that is, until March, when he announced that it would be scrapped.
It is honourable and respectful for Ministers to do little U-turns when they realise that a change is justified. Indeed, if Governments and civil servants admitted the error of their ways more readily, we would have better government. That is preferable to going to the barricades in defence of a position which the Government held previously, just because they held it previously, even if the circumstances have dramatically changed. The situation has changed dramatically and BNOC is now an irrelevance, even if there was some doubt about it six months ago.

Mr. Rowlands: Why is it an irrelevance?

Mr. Rost: The main reason for its being an irrelevance came to light as a result of the recent instability in the price of oil. Last autumn it was obvious that BNOC, far from helping to stabilise the oil price, was an embarrassing contribution to its instability.

Mr. Barron: How?

Mr. Rost: BNOC's enormous volume of oil, which it had to sell because of its obligation to sell it, contributed to the collapse in the Rotterdam spot price. That has not been contradicted by anybody, even if it cannot categorically be proved. The logic of the situation supports that argument.
The spot market is extremely volatile and those who deal in it expect sharp fluctuations. The volume of trading on that spot market has increased, and a good proportion of that increase has been due to BNOC's forced sales. The Government realised, as a result of that experience, that

BNOC, despite its capable and conscientious manage-ment, was not the best equipped organisation to deal with such a volatile market situation.
In saying that, I do not in any way criticise the management of BNOC. I have the highest respect for those concerned. But BNOC was not set up with the facilities to trade in a difficult, volatile market situation. Trading on long-term contracts at fixed prices was a process in which BNOC did a good job. Trading in a minute-by-minute fluctuating market, such as the Rotterdam market, was an exercise for which BNOC was not equipped.
Compared with oil companies, BNOC did not have the cash resources to do other than sell the oil almost the moment it received it. It did not have the storage facilities that oil companies have. Not only do the oil companies have enormous pipelines but, through their organisation upstream and downstream, they can absorb, large quantities of oil by way of their refineries, and they do not have to sell oil on any one day unless it suits them. They can use their storage facilities to adjust to market conditions.
BNOC, with a volume of 800,000 barrels a day, was incapable of doing that. It was, therefore, a forced seller. It was under pressure to deal in the spot market, even when that market was moving in a way unreceptive to forced sales. The Government realised that, and certainly the taxpayers realised it because they were faced with the inevitable losses of that operation.
If my right hon. Friend applies that argument in defence of the Government's change of policy between December and March, he will be adopting a respectable stance, and I am sure that the hon. Member for Merthyr Tydfil and Rhymney would accept that argument. The Select Committee report simply emphasised the nonsensical situation in which we found ourselves in the changed market circumstances. BNOC was not able to adjust to that change and became a costly irrelevance.

Mr. Rowlands: The change of policy took place within a shorter period than December to 13 March. When the Minister gave evidence on 6 March he sung the same song that he had sung in December. In other words, the conversion was within seven days, from 6 to 13 March.

Mr. Rost: The hon. Gentleman is being even more unkind than I was to my right hon. Friend. I deliberately did not quote the Select Committee's proceedings of March. I thought that December was bad enough. What happened in December, it might be said, set in motion the Government's change of policy. Although by March the Government had accepted that BNOC's structure would have to be changed, until that announcement had been made publicly it would have been difficult for the Minister to have pronounced on the matter to the Select Committee. It was made clear in March that the position was under review, and we know the result of that review.
My main arguments are that the Government are right to pursue this legislation; that even if we were not in a position to say so publicly last December or a little later, we realised that the situation for BNOC had changed:, that security of supply is no longer a valid argument—it never really was— and should not be pursued against this legislation; and, above all, that BNOC, far from contributing to price stability, has contributed to price instability.
Under the new agency arrangement, there is a genuine prospect of more orderly oil marketing. It will not just


benefit the oil companies; it will benefit the tax that we collect from them and the nation. It is rather stupid to suggest that the oil companies do not have the maximum incentive and motivation to find the best market and to sell their oil at the highest possible prices. Of course they do, and they will achieve that because they are better equipped to do so than BNOC. Even the smaller companies operating in the North sea should obtain a good deal from this proposal. A variety of markets will be available to them. A co-operative agency may be established. Some of the larger companies which have marketing organisations and refineries may be happy to co-operate with the smaller companies. There do not seem to be any problems there. There is no justification for retaining the BNOC's marketing operation.
I welcome the clause that provides for an annual report on the operation of the agency to be presented to the Minister and to Parliament. That is an important monitoring system. I am sure that we shall all study the annual report with great interest.
I welcome the fair redundancy terms that have been offered to the management and the staff. It would be unjust if they were to be penalised for an inevitable and sensible change in policy which came at short notice. I, and I am sure the House, hope that undue hardship will not be caused to the staff and that many people will change to the new agency or find alternative employment for their undoubted skills elsewhere in the industry.
A large volume of royalty oil will be retained and marketed by the new agency. We should not lose sight of the fact that we are talking about a large quantity of oil—about 250,000 barrels a day, which is about one third of what BNOC handles daily at present. That is the equivalent to the full production of four or five medium-sized North sea oilfields.
The House will want an assurance, if not tonight then in Committee, as to how the new agency will handle that amount of oil and the criteria that will be used to ensure that it sells oil in the most commercial way. Will it contract out to expert marketing companies in the oil industry or will it try to market the oil itself as BNOC has done? What monitoring will there be, apart from the annual report, to ensure that the marketing is being done in the most cost-effective way? That is an important point, which has not yet been covered in the debate.
I welcome the legislation. Last December, when the taxpayer was asked for a substantial subsidy to pay for some of BNOC's losses, the Financial Times described BNOC as a "busted flush", and said it was time that it was finally capped. That was more a reflection of the comments that the oil industry was making about BNOC than an editorial comment. That might be unkind to BNOC, but at least the Government have faced up to the realities of the changed circumstances in the oil world and in the economics of the marketing and pricing and the supply and demand of oil. The Government having accepted that, the House would be ungracious not to support them.

Mr. Dick Douglas: I listened attentively to-what the hon. Member for Erewash (Mr. Rost) said. One or two of the points made by my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr.

Rowlands) in an intervention related to the Minister's non-conversion. On 6 March 1985, in reply to my hon. Friend the Member for Rother Valley (Mr. Barron), the Minister said:
I think one has to look back at the basic purposes of BNOC and whilst it is true that one of the objectives of BNOC is of course to trade profitably, there are also a number of other functions which make it different from a company in the private sector. It has, and this has been spelt out at different times, responsibility for example towards security of supplies; it has responsibility for maximising the benefit to the United Kingdom economy, and given those different roles that it has—another one is that it does provide evidence of arm's length prices so far as taxation is concerned, and this was made clear in the Treasury evidence to the Committee—I do not think it is possible to make a direct comparison between the role of BNOC and the role of the private sector company. Where the role of BNOC is particularly different is when it takes account of the wider public interest, and that is why, before proposals are made on BNOC prices, there is this recognised procedure of consultation between BNOC and the Government, because it is the Government that provides this wider national interest before final decisions are taken.
Amen to that. The Minister was giving evidence to the Select Committee of which the hon. Gentleman is a member. The hon. Gentleman must have heard or read that evidence.
The Minister has argued today that BNOC must be abolished because it has no role to play. We are told that BNOC will cease to be a trader. Will it? The right hon. Member for Guildford (Mr. Howell), a former Secretary of State for Energy, said that the agency will not cease to be an oil trader because it will still have royalty oil. What price, if any, is it proposed to set for that? The agency will have anything between 5 million and 7 million tonnes of royalty oil a year. I know that the figure is diminishing, but by any standards that is a substantial quantity of oil to have at one's disposal. I am not tempting the Minister to help me avoid reselection, but I should not cavil at being told that I would have a substantial amount of oil at my disposal.
We are in a unique position because, if we take the Brown Book's figures, we have reached the peak years of North sea production, according to the Government's estimates. I do not argue with that. We shall produce anything between 120 million and 135 million tonnes of oil a year. We expect production to decline. We are also told, if we believe the press—I do not know whether the Minister can enlighten us on this—that this year this nation is producing the equivalent of Saudi production. Saudi Arabia has, of course, huge reserves.
Conservative Members say, "What would the Labour party do about depletion policy?" As the Irishman said, "How would you get to Ballymena?" The answer is, "Not by starting here." I do not believe that a Labour Government would have been so greedy for oil revenues that they reached this level of production. This Government have had a profligate policy towards exploiting our North sea resources.
I shall go back a little to show how inadequate Conservative policy has been. Before 1973, the Conservative Government did not have a proper tax regime in place. They said that they would introduce such a regime, but they never did. They left the matter to the oil companies, saying, "The oil companies know best." I have never considered that to be a correct view of the national interest. The Public Accounts Committee pushed


the Conservative Government into making decisions with regard to a tax regime. A Labour Government introduced a proper regime for the taxation of North sea oil.

Mr. Portillo: Can the hon. Gentleman remind us how much oil had been produced before the tax regime was put in place?

Mr. Douglas: That is not the point. I recognise the argument that a fairly loose regime was needed to entice companies into what was loosely called an unproven province. The Government would have received revenue from the North sea and companies would have received substantial advantages from capital development. The argument that not much oil was flowing was not one to which the Public Accounts Committee paid attention.

Mr. Portillo: rose —

Mr. Douglas: I shall not give way, because I should develop my arguments.
The Tory philosophy in opposition was to create a regulatory agency. The present Secretary of State for the Environment—the right hon. Member for Wanstead and Woodford (Mr. Jenkin)—went to the United States and was captivated by the Texas Railroad Commission. He thought that it would be a great idea to create an agency along similar lines. The Texas Railroad Commission is, however, a regulatory agency, which regulates output. Then a Labour Government came into power and published their proposals. They created the British National Oil Corporation. That body was originally anathema to the oil companies, but they came to respect its expertise and competence. Participation agreements were signed giving the nation a direct interest in the development of North sea reserves.
I recognise that, for doctrinaire reasons, the Conservative party wanted to undermine those arrangements and the creation of BNOC as an integrated company. One of the members of the Standing Committee on the Oil and Gas (Enterprise) Bill argued — we supported the idea — that BNOC should remain an integrated company. We pointed out the dangers and difficulties involved in splitting off the trading arm from other aspects of BNOC, part of which became Britoil. We argued that it should be kept as an integrated concern.
Britain produces well in excess of its oil requirements. OPEC has not been a failure, although it has had some difficulties. New sources of supply have emerged — Alaska, Mexico and the North sea supplies have had a substantial impact on international supplies. Without exception, those developments are high-cost initiatives and the countries concerned therefore have a more than reasonable interest in maintaining price stability.
The former Secretary of State for Energy—the right hon. Member for Guildford — referred to the rapid changes in the oil market. Who is to say that there will not be critical shortages again? Who is to say that the Saudis will not get fed up with us and open the valves? If someone had told us 18 months or two years ago that Saudi production would fall from 11 million or 12 million barrels a day to 3 million or 4 million barrels a day, few experts would have believed it. They would have said that that would not happen. We know that the Saudis are capable, if it suits them, of opening the valves and producing more than 12 million barrels a day. What would happen to the oil price then? What would happen to the investments in

the North sea which have been made against a background of oil prices of $
26, $27 or $30 a barrel? What would happen to the security of jobs to which the right hon. Member for Guildford referred? We should be in great difficulty.
We have a vested interest in the short, medium and long term in maintaining price stability, and so have the oil companies. They do not make investments lasting 15 or 25 years or calculate their cash flow with a short-term view of oil prices. They take a fairly long-term view. From time to time, the oil companies fall out with one another, but they also fall in with each other. A famous agreement was made in the Highlands of Scotland. Back in 1982 the oil companies came together at Achnacarry and cooked up the price.
What is likely to happen in the North sea? The Brown Book shows that 16 oil companies participate in the licence on the Claymore field and 24 oil companies participate on the Forties field. We can see that we do not need to have secret meetings in the Highlands. The oil companies can have discussions in multifarious ways on how to regulate prices. That is what they will do, and I do not blame them for that. The Minister of State argues that that is the way oil companies operate but that the Government should not try to do so within the agency of BNOC. In saying that, the right hon. Gentleman is throwing away an expertise that has been built up over the years by Mr. Goskirk and others. It will be difficult to replace that essential expertise and to retain the competence needed in an organsation trading in royalty oil. It is difficult to understand the Minister's reasons.
During the proceedings of the Energy Committee in 1984, BNOC admitted that price adjustments could be made. On page 13 of the Energy Committee's report of 6 December 1984—House of Commons Paper Nc. 126—in question 60, the Chairman asked:
May the Committee take it on the basis of that reasonably confident assertion that BNOC will not be expecting to come back to the Secretary of State in the foreseeable future and ask Parliament for a further subvention?
Mr. Goskirk said:
I doubt whether we could give a categorical assurance to that effect, but we see no reason to believe we cannot put our price arrangement on a basis that would enable us to avoid coming back.
Therefore, in his wisdom, Mr. Goskirk said clearly that adjustments could have been made to the uptake of participation oil and to the form of contracts that were being undertaken. However, that is being swept away. Why is the Minister denying BNOC that function? In a sense, the only thing that is being swept away is BNOC's capability to trade in participation oil. No reasonable argument has been put forward.
I emphasise to the Government that that is a foolish policy. A few weeks ago we saw a film on television called, "Here Comes Mr. Jordan". In the film, a boxer dies too early, and Mr. Jordan has a terrible job bringing him back to life again. There is an analogy in this matter. Ministers will be in the same difficulty. For reasons that are difficult to understand, they are denying the House and the nation BNOC's expertise. They should consider carefully what they are doing.
September this year marks the 25th anniversary of the creation of OPEC. OPEC will change, but it will not go away. We need an organisation that is part of governmental policy and gives us greater access to information than at present. That was a major argument


for BNOC. We wanted more direct information about the operation of the oil companies, reserves, profitability, tax and capital investment. At a time when other nations are building up their expertise, the Government, for reasons that are difficult to understand but which are certainly not in the national interest, are withdrawing from active concern in oil and gas. Those are doctrinaire reasons that are not in our real national interest.
I believe that the Opposition are right to oppose the Bill. We are right to say clearly that we shall reinforce the Government interest in that area. The Labour party has looked carefully at the operation of the golden share. The Government say that they do not want to interfere in any way, but they now have a variety of golden shares, for example in Amersham International, Britoil and Cable and Wireless—all ostensibly performing different roles. In circumstances that the Secretary of State will determine, he says that the Government will outvote everybody else. Yet the Government say that they will not intervene. The Labour party believes that we should consider the matter carefully and, when in government after the next election, perhaps implement a one-clause industry Bill, saying that in appropriate companies we shall take out the golden share. Then we shall see the Tories in opposition oppose that.

Mr. Michael Portillo: I listened with great interest to the speech of the hon. Member for Dunfermline, West (Mr. Douglas), and I shall refer to some of the points that he made. I was particularly interested in the scenario that he painted, from his great knowledge of the international scene, of the possibility of OPEC forcing up production and forcing down the price. However, the argument that I shall develop is that I cannot see any way in which either the British National Oil Corporation or the agency that is to replace it could influence the prices in a situation as drastic as that.
To some extent, today's debate has been a re-run of the arguments that were put forward on 14 March. I should like to begin by repeating two things that I said on that occasion. First, I congratulate the Select Committee. It produced an excellent report. Today we have had some fun discussing over what period the Government's conversion to the abolition of BNOC occurred. If it was over six or seven days, the Select Committee deserves credit. Secondly, I repeat the tribute that is due to the staff of BNOC, who have performed their duties excellently. The fact that BNOC is being wound up is not a reflection on the way in which they perform their duties.
When we. held the debate on 14 March I gave a loud cheer to the news of the abolition of BNOC because it was welcome. On the other hand, on that occasion I entered some reservations about the role of the agency that was being brought in to replace it because I thought that the Government should make a cleaner sweep and take themselves more distinctly out of the oil trading market. Having considered the matter in the two months since that debate, and having had the opportunity of reading the Bill, I am more convinced than ever that it is right to abolish BNOC. However, my reservations about the agency that is to replace it are even more pronounced.
There are two basic reasons why BNOC should go. First, it has not been able to do what many of us hoped it

might be able to do—protect our security of oil supply. Secondly, it has made it appear to the outside world—this is a very important point—that the Government were trying to control, or did control, the price of oil. That has led us into all sorts of diplomatic problems.
What I have said is no reflection on BNOC, as it was not set up in a way that could possibly guarantee our security of supply or even help in securing it. In that respect, I am taking an easier road than some of my hon. Friends because I am not trying to justify a change. I do not think that there was a magic date on which BNOC ceased to be useful. It is my contention that from the moment it was set up, and because of the manner in which it was set up, it had no chance of helping with our security of supply.
My main reason for saying that is that the participation agreements gave BNOC access to 51 per cent. of crude oil. But what good is that? The industries in our country do not run on crude oil. Our cars run on petrol and our industries run on the products of oil. It is those products that are the vital ingredients in the whole scene. Control of about half the nation's crude oil does not guarantee us against interruptions of supply. Even small interruptions in the supply of products can lead to severe dislocation and problems, as happened in 1979.
BNOC also entered into long-term contracts for the disposal of the oil that it took. As some hon. Members said today, that led to a lack of flexibility. BNOC was unable to turn around on a sixpence and shed those commitments quickly. It could not respond to events when they were moving quickly. That is not a matter of theory, but a matter of fact. My hon. Friend the Member for Exeter (Mr. Hannam) referred to what happened in 1979. With BNOC in existence this country was, if anything, worse placed to defend itself against interruptions in supply than many countries that did not have such an organisation.
There has been a great deal of discussion about the nature of the assurances and the informal arrangements that are made between the Government and the oil companies. Hon. Members may have their suspicions as to whether those assurances are watertight and whether the agreements, with all their informality, are sufficient. It seems that those informal arrangements go to the heart of the matter, which is the control and supply of products of oil, and not crude oil. That is a very important distinction. The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) said that BNOC was a company on which one could rely to defend the national interest. Its heart might have been in the right place but its oil was normally not in the right place as it-was normally committed. That is one of the reasons why it failed.
I am therefore surprised that the Government want to maintain the participation agreements. I was surprised when my right hon. Friend the Minister of State told us in our previous debate on this subject that, if the Government feel that they will need such oil in the medium term, they can activate the participation agreements. He has reiterated that sentiment today. As several hon. Members said, the medium term in this context means at least six months. Any right hon. or hon. Member who could predict whether there will be an oil crisis next week would be a rich man. To predict that we shall need additional supplies of oil next winter assumes supernatural foresight. The Government can choose between exercising the participation options all of the time—which they clearly will not do or we should not be discussing the Bill—or they will


never exercise the participation options. When I say "never", I refer to the present Government. A Government of a different colour might take a different attitude.
I should like now to consider the problem of the Government appearing to fix or to control the price of oil. The Government should not attempt to fix the price of oil for two reasons. First, they will never succeed, as we are not powerful enough in the world oil market to have such an impact. Secondly, in the long term, lower oil prices are in our interests. I understand the desire for some stabilising, but the Government never seriously believe that they could control prices in the long term. In that sense, I accept assurances that Ministers have given that that was not the business with which they were involved.
Because BNOC was a price setter and a Government body, it is natural that OPEC Ministers assumed that the British Government were attempting or were able to control prices. Time and again, Britain has needlessly given offence to OPEC countries. Each time the North sea oil price has moved, it has looked to the outside world as though the United Kingdom was leading the way on oil prices. Indeed, it looked as though we were leading the price up to get rich or down to sell our oil without having to cut production like OPEC countries. I believe that Lord Wilson of Rievaulx used to joke about Britain becoming a member of OPEC. It has looked recently as though Britain is trying to reap all the benefits of being a country member of OPEC without being willing to pay the club fees.
The Government's response to all of this is curious. The problem arises because a Government body trades 1 million barrels of oil a day and is a price setter. That is what produces the diplomatic problem for Britain. The answer to that problem is for the Government to get out of oil trading. However, they are now proposing to replace BNOC with another Government body which will trade 250,000 barrels a day. I do not see how the agency can avoid being a price setter. Several hon. Members have said that 250,000 barrels is a substantial amount of oil. It appears that the Government have realised that they are in the international firing line and, having recognised that that problem has come about because they have their head and shoulders above the parapet, their response is to put only their head above the parapet, keeping their shoulders well hidden. That is a curious response.
I should like the Government to give up the participation agreements because I think that they are useless, and I should like them to give up royalty in kind. I understand that the main argument for having royalty in kind—it is not a sufficient quantity to affect security of supply — is the cash flow argument. I understand that the Government receive their money earlier from royalty taken in the form of oil than in the form of cash. If that is so, we should change the rules so that the royalty in cash can be taken earlier, so that the cash flow disadvantage can be overcome. That would be much better than the Government continuing to expose themselves by being involved in the oil market.
I am as worried as any hon. Member about security of supply, but I disagree with several hon. Members about the role of the Energy Act 1976 in securing our supplies. I have sometimes felt this afternoon as though I have read a different Act. I believe that it is much more comprehensive than some hon. Members have given it credit for. It is a good piece of Socialist legislation. It contains sweeping powers, which can be activated in

circumstances that fall short of those which Opposition Members have mentioned. For example, the use of oil can be controlled at any time when it seems desirable to the Secretary of State to conserve energy. The full powers can be exercised when there is an international energy emergency and when it seems to the Government that an emergency is looming or is threatened. I do not wish to put ideas into the minds of Opposition Members, but this is a wide-ranging and draconian Act. It is extraordinary to argue that it is insufficient for securing supplies.
I have no doubt that the Government are doing the best thing in abolishing BNOC, but it worries me that they have not given the best reasons for doing so. The best reason is that BNOC never did its job. It is not that it ceased to do its job, as it never could secure supplies. The Government have put all of the emphasis on the recent change in market conditions, especially the change towards the spot market. If they take that line of argument, they are open to the accusation that this is a temporary phenomenon. They are, therefore, arguing for a long-term change—the abolition of BNOC—by giving a short-term reason.
Because the Government have given only half the reason, they are proposing only half of what I believe is the appropriate change. That surprises me as the Government do not have a reputation for doings things by halves. In this, however, they have done things by halves as, first, they cut BNOC in half to create Britoil and today we are discussing a Bill that cuts BNOC in half again to create an agency. I wonder whether the Government will come back with another Bill to cut the agency in half. I am reminded of the old mathematical problem: if a flea starts in the middle of a table and takes a jump followed by a jump of half the remaining distance, and keeps jumping half the remaining distance, when will it reach the end of the table? If I remember correctly, by that method it never reaches the end of the table. My right hon. Friend the Minister of State is not in the least like a flea, but I should like him to steel himself and, with one great bound, get himself free of the table.

Mr. Kevin Barron: I do not know whether I should congratulate the Government and Conservative Members who have spoken today On their use of the Energy Select Committee's report in support of giving the Bill a Second Reading. I am a member of that Select Committee and have felt it necessary to remind myself of what we decided and what evidence we took. Neither my memory nor my reading has led me to any reference to the abolition of BNOC.
The Select Committee's fifth report might have been critical of BNOC's pricing, but it was more critical of the Government's unwillingness to come clean on what BNOC was doing about pricing arrangements. At paragraph 37 the report said:
Various suggestions have been made in the Report about how BNOC's mode of operation could alter in the future especially in order to make it a more market-related pricing instrument, and the Committee will await with interest any announcement of any review conducted by the Prime Minister's policy advisory group. It hopes that Ministers will candidly discuss the options for the future with the House.
Nowhere there, or in other recommendations, is it suggested that we should have a Bill such as this. Indeed, the Committee hoped
that Ministers will candidly discuss the options for the future with the House.


That was on 8 March. On 13 March the Minister made the statement that was the basis of the Bill. I cannot see how hon. Gentlemen who are members of the Select Committee can say that the Committee was moving towards the abolition of BNOC as it exists at present.

Mr. Rost: I am sure that my colleague on the Select Committee would not wish to deceive the House. The Select Committee did not come to the conclusion that BNOC should be abolished, because that conclusion would not have been within its terms of reference. However, our report must have raised serious doubts as to whether there was a useful role for BNOC to continue to play, and so would have influenced any thinking and enlightened Government into doing the obvious.

Mr. Barron: The hon. Gentleman is tempting me. If that had been our view, it would have appeared in our recommendations. I remind the hon. Gentleman of what he said earlier in the debate. His general theme was that the Committee felt that BNOC was a costly irrelevance. That was never said by the Committee, to my recollection. Had the Committee wished to express strong views to the Government about BNOC, it would have done so in the report. The hon. Gentleman is speaking now as if the report had made such suggestions.
I suggest to the Government that they should submit such proposed changes to national corporations to a Select Committee so that they could be considered in detail before a hotchpotch of a Bill is presented to the House for debate.
Some important questions are posed in the Bill, and I hope that the Minister will be prepared to answer them in Committee, if not when he replies to the debate. It is likely that there will be lengthy debate in Committee, and much opposition, if the questions are not answered.
Reference has been made to the question of the small companies that were looked after by BNOC, and the possibility of setting up smaller or co-operative agencies. We have also heard that there have been discussions between the small companies and the larger offshore companies. Many of the small companies do exploration work on the United Kingdom continental shelf. The Minister should tell us whether there is likely to be any effect on exploration in the North sea and the discoveries of oil and gas. Is the establishment of the agency that is to replace BNOC likely to affect exploration by small companies?
When the Minister gave evidence to the Select Committee on 6 March, two days before the report appeared, I asked him whether BNOC should be used as a buffer, using taxpayers' money to deal with short-term fluctuations in North sea oil prices. The Minister said that one of BNOC's roles was to provide evidence of arm's-length pricing, as far as taxation was concerned, in the offshore companies.
What are the implications of that now that BNOC is to be wound up? How will such evidence be collected now, and what are the implications for the Treasury and the public purse if the role played by BNOC for some considerable time in connection with taxation is given away or abolished?
I appreciate. the guarantee given in schedule 2 about the pension rights of people who work for BNOC. If staff are transferred to the new agency, their pensions rights will be

transferred too. I agree with my right hon. Friend the Member for Glasgow, Govan (Mr. Milian), who is a member of the trade union involved, on that point. I am pleased that the Government have seen fit to accept that that provision should be made.
However, I received a letter today from my constituent Mr. MacDonald of Main street, Ulley, near Sheffield. I passed a previous letter from Mr. MacDonald to a Minister last month. Mr. MacDonald can get no similar guarantee from the Government in the case of the deregulation or privatisation of buses and the National Bus Company's pension scheme. The Government seem to take a different attitude on different Bills.
There is also the question of counselling for redundancy. BNOC's employees are working in a high-technology industry and are highly skilled. Are the Government using the counselling service to advise people, for instance, on how to set up agencies? If so, is it possible that there will be more than just one agency —that there will be some smaller entities that will look after the small companies?
Clause 4 of the Bill refers to the disposal of surplus property owned by BNOC. The proceeds of sale will be given back to the Secretary of State. The clause states that it shall be the duty of the agency to get
the best terms reasonably obtainable
for such property. I do not know what properties the agency will wish to dispose of, or what their value is. However, I hope that the Minister will show diligence in this area. When public assets have been sold off in the recent past, it has become clear within a few short weeks of their disposal on the open market that the British taxpayer, through the Consolidated Fund and the Treasury, has not received full value for them. It would be interesting to know exactly how public accountability will be imposed in the case of the disposal of properties by the agencies.
Clause 2 poses a number of questions. The Minister has told us that, although under subsection (2)(d) the agency will have power
to buy, sell or otherwise deal in petroleum on its own account",
it will not be allowed to buy liquid petroleum gas. My hon. Friend the Member for Merthyr Tydfil and Rhymney asked why that was so. BNOC is not heavily involved in LPG at present, but it makes some profit by buying it. Why will the agency not be permitted to deal in LPG? Who is likely to buy the gas that is currently bought by BNOC, and to make the profit that the agency will lose?
The major question is about participation agreements. We have some security of supply through the participation agreements. The Minister said that we had assurances from oil companies that if the Government had to enact the participation agreements to bring 51 per cent. of our offshore oil into Britain, they could do it. That begs many questions. When BNOC is not buying and selling, even to the same company as it does now, and if we do not take up the participation agreement immediately, it is likely that oil companies will look for markets for their oil throughout the world, and rightly so. If they enter into long-term contracts to supply oil elsewhere, and if for some reason we lose the benefit of heavy duty, and North sea oil could be used in this country, what would happen? What would happen if there were a conflict between those companies' contracts throughout the world and the participation agreements, which provide assurance for us? Are those agreements legally binding? Can we physically


force companies to bring oil into the country? We need further assurances from oil companies. Their assurances are more to shareholders than in the interests of the country. Shareholders watch what oil companies do, but they are not in a position to look after our national interests.
The hon. Member for Erewash (Mr. Rost) said that, because all the pipelines come on to mainland Britain and the oil is landed here before it is exported elsewhere, we have some security of supply. The Minister said exactly that on 6 March in answer to a question of mine during an evidence session in the Select Committee. He believed that the security of supply was a major reason why BNOC was in existence. His answer is on page 64, and I am sure that he has read it again and again. However, only a few days after, on 13 March, the Minister made a statement to the House abolishing BNOC.
In his evidence the Minister said that BNOC was responsible for maximising the benefit to the United Kingdom economy. That was exactly what the Select Committee's report was about and what hon. Members were interested in. We were interested to know whether we were maximising the benefits to the United Kingdom by using Supplementary Estimates. The Minister gave us assurances, although they were not concrete ones. He did not say exactly how much we got back through BNOC's pricing arrangements.
On 6 March the Minister recognised that BNOC had a definite role to play in three major areas. Why is the Minister now prepared to come to the Dispatch Box and say that he no longer sees such a role for BNOC? What is our national interest in offshore oil now that BNOC is to be abolished and an agency set up? All hon. Members should look after the national interests, and not the interests of either oil companies or fellow hon. Members.

Mr. Lewis Stevens: I welcome the Bill. It was not wrong to set up BNOC in 1976 because BNOC could play a sensible controlling role. We knew little about what the markets or the output quantities would be. There were many estimates and ideas but, as we know, many of the estimates for oil have floated up and down considerably over the years.
In 1977 we produced about one tenth of the output that we produce today of North sea oil. The position has changed and there is a different role to play. During those nine years we have seen considerable changes in oil production throughout the world. The markets have fluctuate). Sometimes they have seemed to be in the control of OPEC, and sometimes in no one's control. Sometimes the United Kingdom appeared to have a strong effect through BNOC on world prices, and at other times we have had comparatively little effect.
The big difference is that today BNOC's function of trying to avoid the destabilisation of prices is no longer relevant. That is the major factor. A Labour Member said that in future the Opposition would try to resurrect a similar body. That would not be the right thing to do. BNOC has played a part for nine years, but it would be pointless to resurrect a similar body in wholly different circumstances, and hon. Members on both sides of the House have admitted that future circumstances are rather uncertain.
We must now change our view of what type of organisation and sort of control the Government should

have, and of how the oil industry should be allowed to progress with its North sea interests. It has been suggested that BNOC is half its previous size. I welcome that. If I had been present in 1982, I might have pushed harder to reduce BNOC even below half its size.
We still retain royalties in the form of oil in the Bill. I query that. I would be happier if I knew that we would accept payment not in oil, but in cash. However, in the Bill we have the opportunity to contract it out. I hope that the matter will be considered seriously, and that involvement in the market and trading will be phased out.
I have never thought that the ability of Government enterprises to enter trading is a good idea. Nevertheless, I pay tribute to the work done by the employees of BNOC. However, I question whether it is right to have Government involvement in oil trade. I would be happier if we could reduce the trading concept of the new agency, for royalties too.
The Opposition have shown considerable pessimism about the part that the private sector and oil companies will play. That is not surprising because we have heard many criticisms of the private sector from the Opposition on many previous occasions. It is pessimistic to look at the matter and to say that the job cannot be done. The private sector has carried out explorations and development in both the North sea and technology. It is essential to develop new technology, and during the past few years it has developed to a remarkable extent. There was more exploration and more wells were drilled last year than previously — a total of 182. There were 10 oil discoveries, one oil and gas discovery, eight gas discoveries, one condensate discovery and three gas and condensate discoveries in 1984.
Development in the North sea is not completely uncontrolled. Any general energy policy mus: include some controls. However, the Opposition suggest that there should be much closer control and that the Government should tie the industry so tightly that they will always know what is happening, and that they can make things happen. But such control, which means that Governments must interfere in those organisations, is rarely successful. The Bill will remove direct interference in the industry by the Government, which would not be a bad thing.
I doubt whether BNOC has managed, as some have suggested, to control prices. As my right hon. Friend the Member for Guildford (Mr. Howell) said, prices changed because the world market changed. He suggested that prices would decrease; indeed, it is possible that they will collapse. Only the oil companies are in a position to decide whether that will happen.

Mr. Bermingham: Does the hon. Gentleman agree that the Wood Mackenzie report of 19 December 1984, when reviewing BNOC and what use it may have, said in simple terms that the effect of BNOC was not that it controlled or organised prices, but that it slowed price changes? Did not that independent report show the value of BNOC in world oil markets?

Mr. Stevens: I accept the hon. Gentleman's point, but I doubt whether BNOC would have continued to he effective.
The hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) said that, through BNOC, the Government always knew what was happening in the industry. That is a good point, and I hope that the Minister


will consider it. Perhaps the change that the Bill will introduce will enable the Government to be as well informed as they were in the past, but I should like confirmation of the fact. I hope that the Government will always know what is happening as they formulate their energy policy.
There will be other problems with world oil production. Many hon. Members have asked whether OPEC production will increase, or whether we can live with the reduced output of Saudi Arabia and other countries and the undoubted back-door selling that happens at present. The removal of BNOC will not play a great part in that. There will be little difference between the proposed arrangement and the retention of trading by BNOC. We can create changes in the world market through our total output, not through a trading organisation that has been set up by the Government.
Some hon. Members asked whether the participation agreements will be honoured. I am confident that our arrangements for security of supply will be as successful, should the need arise, under the new policy as they were before. In an emergency, we have the power to obtain oil supplies without much difficulty. We should have to invoke the legislation to do it, but it could be done. However, most of the threatened developments will not happen overnight. There will be opportunity in the weeks or months ahead to see the effect on our supplies, and we shall have adequate time to talk to the oil companies and to ensure our internal supplies. In any case, North sea oil comes to Britain anyway. We consume a great deal of what we produce, and I believe that the agreements with the oil companies will secure our supplies in the future.
It has been suggested that the development of production in the North sea will be inhibited because of the change in the structure, but there is no reason why, with the oil companies doing most of the trading, there should be the slightest inhibition on the development of technology or of the industry in general.
The Bill forms the basis of a more sensible outlook. If anything, I should have preferred it to go a little further and to have abolished trading by a Government organisation. However, it is a move in the right direction. I hope that in Committee some of the details can be examined so that we can be confident that our general approach to the industry will be the best possible, and that our security of supply is maintained.

Mr. Gerald Bermingham: I begin by declaring a semi-interest, in that I, too, am a member of a trade union to which many of those who work for BNOC belong. It is in our joint trade union interests that I begin by saying that it says little for a Government who have been party to a performance whereby at 3.15 pm one day the managers are told and at 3.30 pm the staff are told that their jobs have gone when until that day there had been an active recruiting programme. All right hon. and hon. Members would say that that was bad industrial practice. It cannot be argued that it was justified because the removal of BNOC and its replacement by an agency had to be kept secret. The future of BNOC was the subject of discussion for some time before that. There is no justification for those 120 people losing their jobs on what appears to be an ideological or political whim.

Looking back through the history of the British National Oil Corporation, one sees the sale of Britoil. I do not propose to criticise the method by which that sale was started, except to say that it is one more national asset that has been squandered during the Government's tenure of office. Now they wish to sell off the gas industry and to squander that asset, too. Many of our national assets will be thrown into the hands of private owners, not always from the United Kingdom. Indeed, our national assets are being steadily stripped away. However, I shall try not to trespass too far from the main debate, which is the Second Reading of the Bill.
This squalid little Bill will break up BNOC and waste all the expertise that has been accumulated there, although half of the personnel will go to the agency. At the end of this squalid affair, I hope that those who have given loyal and effective service to BNOC will not suffer financially. We all know that there are 4 million-plus people out of work, and it appears that at least 80 of the 120 are destined to join that queue. Jobs are not easy to come by, and people sacrificed jobs in other careers to transfer to BNOC, which up to 13 March appeared to be expanding its operations.
Anybody who changed his job because he thought that there was a future with BNOC, and was given a job by the management of BNOC in good faith, should not suffer materially as a result of this change. The Minister and I may politically disagree about everything in sight but I hope that he will agree that justice must be done to employees of BNOC, particularly to those who will not be taken on by the agency. I wait with some interest the Minister's winding up speech, and I hope that he will give us some assurance. I know that certain terms are being discussed and it would not be right to go into the details, but I hope that they will be both generous and reflect the way in which BNOC met its untimely death.
I sought to intervene in the speech of the right hon. Member for Guildford (Mr. Howell), but he seemed not to see me. Perhaps that was as well for him, because I may have asked him a question that he would not have liked. However, I intervened in the speech of the hon. Member for Gordon (Mr. Bruce) and made a simple comment about the farmer and his corn stock.
It is all very well instantly to react to the events of the day. However, all of us who have been involved in the market—I have been to no great extent, merely as a professional observer or participater on occasions—have watched the oil market wobble around with its ebbs and flows of plenty and shortage over the past 20 years. All of us can remember the early 1970s and the sudden panic of the world oil crisis and the feeling that there was not enough oil to go around. Everybody panicked into measures to do this and that.
We have watched the North sea oilfields develop from nothing in the 1970s to self-sufficiency for Britain in the 1980s and apparently into the 1990s. We have watched the OPEC countries either fall out with each other or fall in with each other, but that did not affect the oil supply. We have watched the development of the South American oilfields and seen the North American oilfields begin to peter out in some areas and develop in others. New techniques and new concepts have been developed. All the time, the nature of the market has changed, but there has always been a relationship between world economic growth and development and the availability of oil.
At the moment, the world is in recession. It is beginning to pull itself out of recession, and the Americans are certainly coming out of recession, although we hear many worrying comments and much speculation about the large American deficit and whether this will cause a crash in American finances.
Leaving political differences aside, it is to be hoped that we too will turn the corner and come out of recession. As we do so, we shall notice a rather strange feature, which the right hon. Member for Guildford and many other Conservative Members ignored. We shall need oil. It is used when countries are working and the greater the consumption of oil—the resources exist—the greater is the take-up in the slack in the world oil markets. Companies begin to place long-term contracts. We move away from the predominance of the spot market into the predominance of the long-term contract market. That is the nature of the oil industry.
To react, as the Government have done, by killing off BNOC simply because the spot market appears to have begun to predominate over the long and short-term contract placing markets is to react to the instant without seeing tomorrow. That is the Government's sin. Instead, they should have looked at the problem in its entirety, taking a long-term view and asking the simple question of what BNOC can and cannot do and what its great value has been.
I have a copy of the Wood MacKenzie report, dated 19 December 1984. We live in the days when it is said that to change the law of the land is a long and slow process, but on 14 May, barely six months after the report was published, we are pushing through a Bill that will change all our marketing concepts. The Wood MacKenzie report analyses BNOC, discusses whether it has a future and looks at various aspects of it that seem to be of use. It says that price stability is one of BNOC's attributes.
It says:
BNOC played an important role during the price difficulties in the late 1970s and early 1980s and without doubt helped to stabilise the situation. The role of BNOC has been one of slowing rather than changing the direction of the market.
I intervened in the speech of the hon. Member for Nuneaton (Mr. Stevens) and put that point to him, but he seemed not to follow it. The great advantage of BNOC is its stabilising effect. It stabilises because it slows the market. If one has a daily placement of 800,000 barrels, one has an influential part to play in the market. However, to ask BNOC to try to control prices, even with such an interest, is to ask the impossible, particularly when one asks a producer at a time when the spot market rather than the term contract market predominates.
I should have thought that even a student in a first year class of economics at any university would have been able to tell the Government that. However, that is looking at things realistically, standing back and taking a long-term rather than a reactive view, a considered view rather than a political or dogmatic view.
The argument that I, too, take a political view may be thrown back in my face. However, I can be objective enough on occasions to go to experts, ask their advice, stand back and make an objective judgment. I am sure that hon. Members will agree that most such experts are not natural supporters of my party. They are experts who have looked at the problem, considered the options and the facts and on 19 December last year made a comment.
The report also says that the advantage lies in the security of supply. The arguments for that have been well canvassed this evening, and I do not propose to raise them again. On logistics, the report says that,
in fulfilling a central co-ordinating role, BNOC can help to maintain a regime of orderly offtake and liftings. It has also been a ready buyer from the very small participants such as companies owning the Forties units.
It is all very well saying that the little companies can go in future to the big companies and the big companies will peg their market accordingly. However, anybody who believes that companies act as charitable independent bodies lives in cloud-cuckoo-land. All of us know that Marks and Spencer dominates its suppliers because it demands quality, fixes the price and has almost a monopoly hold. Once such a company is buying 80 or 90 per cent. of one's product, one has to obey it or lose 80 or 90 per cent. of one's production. There is no alternative market. There is only a handful of major companies for the little companies to go to. The little companies will not have the same security, the same outlet and the same pricing practice as they had in the days of BNOC.
One keeps coming back to a simple question—why get rid of BNOC? Why did the Minister come before a Select Committee in December 1984 to defend BNOC and then announce its destruction in March 1985? What has led to this absolute change of mind? It cannot possibly be—I should be absolutely horrified if it were—that, because the spot market had dominated for three months and there had been fluctations in it, it was justifiable to turn the Government's policy on its head. Or could it be, as my hon. Friend the Member for Rother Valley (Mr. Barron) suggested, that clause 4, which has been cobbled together to carry out this despicable act, holds the secret? Clause 4(3) states:
Any sums received by the Agency under subsection (1) above, other than such sums as may be determined by the Secretary of State with the approval of the Treasury to be sums required to be retained by the Agency for meeting expenditure incurred by it under that subsection, shall be paid to the Secretary of State; and any sums received by the Secretary of State under this subsection shall be paid into the Consolidated Fund.
The agency will have a limited function. BNOC assets will be sold off, and again the dear old Treasury will collect the loot.
As I said in my intervention during the speech of the hon. Member for Gordon (Mr. Bruce), this can be compared to the farmer with his barn of corn. When this Government came to power their barn of corn contained many interesting assets. It contained the gas industry. That is about to be sold off. It contained British Aerospace, computers, shipyards, oil. It contained a wealth of assets, all of which belonged, Mr. Deputy Speaker, to you, to me and to every other citizen of the United Kingdom. We have had six years of this Conservative Government. They are even talking about selling off the water boards. Soon nothing will be left and the barn will be empty.
One does not to have to be more than a first-year economist to know that if one has an income-producing asset it provides an automatic income and that if one sells the asset there will be no income. If one sells off one's assets, including selling some of those assets for next to nothing, as happened over British Telecom, Arnersham International and several other assets, and then squanders the proceeds, at the end of the day nothing will be left. Just as the farmer who squanders his corn has no corn left to plant for next year, so this nation at the end of the tenure


of this Government will have lost its major assets, its seed corn and its ability to invest. It will therefore be that much poorer.
I regret having to call this Bill a squalid little Bill, but that is what it is. Clause 4 contains the secret of it all. BNOC was a viable, profitable national asset. In 1982 the Government took out the upstream element and sold it. If one looks at the value of what they sold, it has gone up and up. Who has benefited from that sale? It is certainly not the people in my constituency, or the ordinary chap who pays his taxes and goes to work, if he is lucky enough to have a job. The institutional investor has benefited, the top 5 per cent. of our population and those who are living abroad.
On 14 May 1985 the Government intend to dismantle what is left of BNOC. Is it not interesting—perhaps the Minister of State can answer this question if no other—that nowhere is reference made to liquid gas products. What will happen to them? Or is that another part of our seed corn which will also be squandered?

Mr. Michael Brown: I have no hesitation in supporting this excellent piece of legislation, because BNOC is an anachronism. It seeks to interfere in an essentially free market. I bring to the debate the experience of an hon. Member who represents two of the country's greatest oil refineries on the south bank of the River Humber, the Conoco oil refinery and the Lindsey oil refinery. Those refineries, and the companies which have invested so much in them, have been anxious about the destabilising influence of BNOC not only during the last few months but over a period of several years. Whether one is refining or extracting oil, the oil market is essentially a naturally free market. The establishment of BNOC in 1976 was an act of deliberate Government policy. They made no secret about it. Their deliberate policy was to intervene in the free market.

Mr. Bruce: The hon. Gentleman says that the oil industry is a free market, but does he seriously suggest that the price we are paying for North sea oil is determined by a free market? Is it not following the lead of OPEC, which is a cartel and which intervenes in the market?

Mr. Brown: If what the hon. Gentleman says is true, there is no doubt that, because of the existence of BNOC, the market is not as free as it ought to be. I take his point about the role of OPEC. I represent constituency interests which compete against cartels and price rings and I recognise that problems are caused for a free market by any cartel or price ring, which OPEC might be said to be. However, if they can influence a market, when they have control over such assets as BNOC, in order to establish a freer market, it is right and proper for a Government in whose philosophy I believe to introduce legislation of this kind.
The market for oil in terms of the world economy is a free market. Attempts, even by OPEC, to control the freedom of that market have resulted in trouble for OPEC during the last few years. We have to recognise the fundamentally natural nature of the worldwide oil industry. It naturally responds, far more than do many other industries, to the stimulus of demand and supply. In spite of the BNOCs of this country and the OPECs of this

world, whatever controls Government or international organisations try to bring to bear to establish stability in the market, one eventually finds that there is trouble. That has been the case not only during the last few months, owing to difficulties with the spot price, but generally with regard to the oil market as a whole. BNOC has sought to do as good a job as possible, but during the last few months or years, however well run, there was no way in which they could bring any helpful influence to bear.
The hon. Member for St. Helens, South (Mr. Bermingham) referred to the beneficial effect of BNOC trying to control the spot price, and in his earlier intervention he suggested that the great virtue of BNOC was that it managed to slow down the movement of prices. However, there was a fundamental pricing dilemma, and BNOC's policy which he suggested had been of advantage to the oil market did not, I suggest, result in such a benefit.
If one goes back to early 1983, the hon. Member for St. Helens, South might be able to claim that on two occasions BNOC steadied the market by delaying pricing moves. That was the burden of the hon. Gentleman's intervention and part of his speech. However, that weapon can be used on only one or two occasions. In the end, the existence of a semi-official term price becomes a force which creates the destabilisation that the hon. Gentleman and his colleagues who are opposing the Bill are seeking to avoid.
Any change would and did risk attracting changes in other official prices and market reductions which anticipated such changes. There was a great danger of setting off a downward spiral in prices, thereby causing the very destabilisation that the hon. Gentleman felt BNOC's operation in 1983 might have avoided. Any move that BNOC made towards a market-related pricing system would inevitably have been a sure recipe for changing what was even then a weak market into a disastrous one. After every month in which spot prices change and go below the BNOC price, inevitably BNOC would feel that it had to go beneath the spot price. That weakening of the market would have been a disaster.
The Government or BNOC could not have had the increased powers which would have been necessary to intervene in the market, for the simple reason that large-scale storage for the substantial additional reserves that would be sloshing around all over Britain could not have been funded. It was shown clearly in 1983 that the argument chosen by the Opposition and by the hon. Member for St. Helens, South would have been a route to even weaker prices and an even more destabilising influence on the oil market.
A Conservative Government committed to free enterprise, to ensuring that the ingenuity, skill and market response which can only come when the private sector can operate, can only take this course. That is why I welcome the Bill. The Bill is philosophically based. I make no secret of the fact that I would have welcomed it earlier. There is some merit in the charge that we should have had the Bill in 1982 along with the other piece of legislation, of which this is an inevitable and natural consequence. I class myself as one of those who might carp at the margin but I am delighted that the Government have seen fit to do what is natural for a Conservative Government.
Earlier this year I had the privilege of attending the Institute of Petroleum's annual dinner, the major occasion when all the oil companies bring together Members of Parliament and those involved in politics on both sides of


the House together with all the industries. That dinner was addressed by my right hon. Friend the Prime Minister. She drew attention to the contribution which the private sector of the oil industry, both in refining and extraction, has made to our economy. That is a contribution which the withdrawal of BNOC will assist by ensuring that Britain's oil market becomes even more attractive for investors.
Let us not forget that oil exploration in the far-off early days was undertaken by the private sector. Let us not forget that, before it was recognised by either Labour or Conservative Governments that oil extraction from the North sea would be a lucrative fund raiser for the Treasury, there was no Government funding which would be anywhere near that of the oil companies as they engaged in what was a risky enterprise. In those far-off days in the late 1960s and early 1970s, it was the entrepreneurial spirit of the oil companies which made it possible for successive Governments to benefit from the revenue which was raised and which made it possible for the Socialist Government in the mid-1970s to impose its political philosophy on what appeared to be a success story.
Would there have been a BNOC in 1966 when we did not know whether there was any oil in the North sea? The fact is that in the late 1960s when a Labour Government were in power and when there might have been some cause for Government assistance in the market place to encourage the oil companies to explore a natural resource that had not hitherto been discovered, there was no such move. It was only once the reserve had been discovered, when there was known to be profit in the North sea, that action was taken. There was profit in the North sea, there is profit in the North sea and there must continue to be profit in the North sea.
I see the North sea from a constituency point of view. It has brought investment to south Humberside. It has brought a massive new Conoco works, which this year is engaging in a £100 million expansion scheme. That will result in every fabrication yard in south Humberside being full of contracts. Only about six weeks ago I had the privilege of opening a new design centre because the oil companies have so much new design work that they cannot undertake it themselves. About 50 people are employed in a design centre, contracting to the Conoco oil refinery in my constituency, to cope with that massive expansion plan which is founded upon the investment and profit that has come from the North sea in the past few years.
The Conoco oil refinery welcomes the Bill. It is the provider of much wealth in terms of jobs in my constituency and it will provide many more jobs during the coming months as its expansion programme takes off. I am glad that the Government have seen fit to bring the Bill forward for a Second Reading today. I regret that we have had to wait a year or two longer than I might have wished, but nevertheless I welcome it.

Mr. Ken Weetch: In the short time that I have at my disposal I want to come pretty quickly to the brass tacks of what I have to say. The Bill is more a matter of political ideology than of rational conviction. If one thing has become clear from the Bill it is that Britain has only a hazy energy policy, if we have one at all. We still have not decided on the best possible machinery and apparatus to do what we aim to do. The great assumption that underlies the Bill is that what multinational oil companies decide and what they do will always coincide

with the national interest. That is the basic philosophical assumption underlying the Bill, and it is simply untrue. The British National Oil Corporation was set up initially to safeguard Britain's interest in a world of multinational oil companies. As they ever did, multinational oil companies always act in their own interests, particularly at a time of crisis.
The essence of the Bill as I undertstand it is that the corporation is to be replaced by a Government oil and pipelines agency. The agency will be responsible for handling Government royalty oil, regulating Government pipelines and activity concerned with participation contracts. It is my view that, whatever else an oil policy has to have, security of oil supplies for the country must be in the forefront. Of that I am absolutely convinced.
It is Government policy to embark on privatisation and a policy of free market economics. The assumption, as I have already said, is that this free market economics pursued by multinational oil companies will always coincide with the national interest—their interest is the nation's interest. That is a fallacious assumption. Nevertheless, it underlies the Bill.
I put it to the House that security implications now for oil supplies are a good deal more complicated than they were. When we were in government eight years ago, I went to a dinner and I sat next to a very powerful oil man. They are always plain-speaking people. I asked him, "What do you think of the British National Oil Corporation?". He chose his words carefully, and he said, "The British National Oil Corporation is a confounded nuisance." Therefore, it did not take long for me to realise that, if ever we had a free enterprise Government that could be influenced by multinational oil companies, the British National Oil Corporation was doomed and, indeed, it was. It has already been split up, and what we are discussing here is the rump. Large scale big business always wanted the corporation out of the way, and now it has gone.
I believe that security of our oil supplies always was a sound argument for the corporation. One will always have a better chance—and I will put this in terms of general principle only, because I do not have time to argue the case in detail from practical experience—of safeguarding the nation's oil supplies with a state oil company than with mulitnational oil companies. I think that it is a simple matter of principle, and at this stage I will go no further than that.
My right hon. Friend the Member for Glasgow, Govan (Mr. Milian) cast some doubt on the validity of participation agreements which can be reactivated —I think that is the word. I think that his doubts were well founded, and that these agreements are in no way a substitute for what is being lost.
My second main point concerns what my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) said regarding small oil companies with no trading departments of their own. The best way that I can put it to the House is to quote a short passage from the Financial Times of Friday 15 March which asks the question:
Who, in the absence of BNOC, will trade oil for smaller oil companies which have no trading departments of their own?".
The same article answered the question one column later:
New trading mechanisms will also have to evolve as BNOC winds down. Smaller companies will probably have little alternative to marketing their oil through larger companies, a point which was the source of some bitterness yesterday.".


As far as I can ascertain from the main course of the debate, that point has in no way been resolved. I have listened to much of the debate, I have listened to the experts, I have listened to hon. Members who serve on the Energy Select Committee and I have listened closely for certain basic. questions to be answered. Not being a specialist in this area, and being a simple man anyway in the economics of energy, I want a number of simple questions answered. Is it in the nation's interest to have a high price for oil or a low price for oil? I have heard no hon. Member answer that yet. I have heard two opinions. The first was that it is better to have a high price for oil because we are an oil exporting country. Two minutes later I heard that it is better to have a low price for oil because that lowers costs. A couple of minutes after that, I heard an hon. Member say that if we have a low price for oil that means that there is a low price for oil for the Japanese economy as well, which will compete with our own. Oil economics is a confusing world. The Government must prove their case, and they have not shed a great deal of light on a number of fundamental questions.
Will the new arrangement have very much effect on the spot market? I understand that we are moving towards free enterprise. If that is so, surely the market will fluctuate rather more than when we had the constructive management—or at least an attempt at that—of BNOC.
In the limited time that I have had to carry out research, I have been given to understand that, as a marketing organisation, the rump of the corporation has had a constructive influence on prices and marketing at certain critical periods — it has certainly had a constructive influence on price stability. In the late 1970s and early 1980s — difficult times — BNOC helped to stabilise a critical position. It earned its spurs. Even supporters of the corporation would not argue that, at the end of the day, it can alter the long-term fundamental supply and demand in the oil market. But over short periods it has altered people's perceptions and produced a stabilising effect.
The Bill does not give us very much. It is being introduced for political reasons. The Government have policies of free enterprise and privatisation. I suspect that, in trying to have a constructive price influence in the world market, the Government have attracted international political opposition. However, even put together those do not make a policy, so I oppose the Bill.

Mr. Peter Hardy: I am pleased to follow my hon. Friend the Member for Ipswich (Mr. Weech), not least because of the experience that we shared last night in the debate about Felixstowe, when we heard Conservative Member after Conservative Member demanding not merely that the harbour be developed but that vast public investment should be put into infrastructure—that roads should be built and services provided so that private profits could be made. It is interesting that Conservative Members are taking the same approach in this debate.
I hope that I am not taking matters out of turn in saying that it was entirely appropriate that my hon. Friend should follow the hon. Member for Brigg and Cleethorpes (Mr. Brown). Enthusiasm is always attractive — it is a commendable quality in many cases. But for an hon. Member to fail to recognise that our offshore resources are
finite and to want to see an even more excitable oil industry rushing to develop our offshore reserves is inappropriate to the current position. If the hon. Gentleman has his way, there would be more wells than water off the British coast.
It has been an interesting debate. Obviously, there have been considerable differences in approach on both sides of the House. My hon. Friends have always perceived the need to maintain security of supplies while Conservative Members have been remarkably complacent in their assumption that oil supply will be all right on the night. The truth is that it will not. Of course, there were differences. The hon. Member for Enfield, Southgate (Mr. Portillo) took a more extreme view than his hon. Friends. He did not mind whether we had any crude oil guarantees because, so far as he could see, crude oil did not matter. He should recognise that existing arrangements provide for a sufficient degree of buy-back to guarantee an adequate supply to our refineries.
I apologise to the Minister of State for not starting with some comments on his speech in opening the debate. He tried to be fair but he left many questions unanswered. Some of them may be left to the Committee stage but I ask the Under-Secretary of State to answer quite a few tonight.
My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) presented a thorough analysis of the Bill. It might have been helpful if the Minister's approach had been as scrupulously detailed. My hon. Friend pointed out the effect that the measure might have and demonstrated how the dismantling of BNOC might weaken our national capacity to influence decision-making offshore and perhaps reduce our capacity to secure proper development of the oil market. He showed how the Bill could be seriously disadvantageous to the security of supply—a point which my hon. Friend the Member for St. Helens, South (Mr. Bermingham) pursued when he pointed out that the oil reserves that have been bequeathed to us are like seed corn which is being used improperly.
Several of my hon. Friends referred to the debate on 18 December when the House considered those sections of the 1984–85 Supplementary Estimates concerning the Energy Department. Much of that debate related to the position and role of BNOC. My hon. Friend the Member for Merthyr Tydfil and Rhymney showed in that debate how it was assumed at the time of its shearing, when the Oil and Gas (Enterprise) Act 1982 was being considered, that BNOC would be left with an important role which would ensure that the national interest was served.
Reference has already been made to the contribution of the Minister of State on 18 December. I trust that the Under-Secretary of State will offer an adequate comment on that contribution. It is interesting to note that only five months ago, in that debate, the Minister of State recognised that
the United Kingdom continental shelf and the price that Britain secures for oil in international markets is not"—
and, in my view, most not remain—
entirely under the control of international integrated companies. We must also ensure that there are some arm's length sales at transparent prices." — [Official Report, 18 December 1984; Vol. 70, c. 230.]
We have seen a tremendous change since then. The hon. Member for Erewash (Mr. Rost) seemed to adopt his customary posture of running very rapidly to be able to say, "Me, too" to the Government when they make any change in energy policy, but he must have run with enormous speed in this case because the Minister's


conversion has taken place in a much shorter period than the five months that have elapsed since that debate. I trust that the Under-Secretary of State will provide a further explanation of the speed of conversion that the House has witnessed.
To be fair, several Conservative Members have sought to ensure that the destruction is humane. In addition to that humanity, my hon. Friends are deeply concerned, perhaps because some of them belong to the same trade union as the staff of BNOC, that the treatment of the staff shall be generous. It has been suggested that fair arrangements will be made. The Under-Secretary of State may prefer to wait until the Committee stage before he provides detailed information about that. The distinguished and often extremely important and valuable service that BNOC staff have provided over the years should be properly recognised. Will any of them be retained in the agency? May we have an assurance that those who feel sickened by the Government's sudden conversion and who do not wish to serve in the new agency will not be under any compulsion to remain?
Perhaps the Government will provide, through their various job creation schemes or educational arrangements, an opportunity for them to set up in consultative capacities so that they may become gamekeepers turned poachers, or the other way round. It will be a pity if the Government's behaviour has so disturbed the diligent and devoted staff of BNOC that they feel unable to remain in the public service. Over the years they have developed not only experience and knowledge but a commitment to their organisation, and that should not be so sweepingly eradicated.
The debate has not ranged as widely as I had suspected it might, and I am anxious to comment on the various speeches that have been made. For example, I thought that attention might have been paid earlier to a speech that the Minister made in Texas on 7 May last. His remarks were relevant to national energy policy, and our feelings about his speech on that occasion illustrate the difference that exists between the two sides of the House on this issue.
Speaking in Texas, the Minister boasted about our capital investment in the oil industry and the record levels of exploration and appraisal drilling. He said that 182 wells had been started in 1984—a considerable number, though perhaps not enough to please the hon. Member for Brigg and Cleethorpes. The Minister thought that the number of wells drilled this year might be even greater than last year's total. He was pleased about there having been an increase in the amount of oil being discovered. That is not surprising, with more wells being drilled.
In that speech, the Minister failed to perceive that the oil companies—no matter how closely attached to them some Conservative Members may be and no matter how cordial relations with them may be, so that the Minister can talk about informal agreements which might help us in our hour of need—are devoted to profits.

Mr. Hannam: What about the trade unions?

Mr. Hardy: The hon. Member for Exeter (Mr. Hannam)—who made a complacent speech to which I shall come— is right to refer to trade unions, which, naturally, seek to improve conditions for their members. They would be misguided if they did not.
Likewise, the first obligation of the companies is to make profits—one might say, to perform the role of the

vulture, and the vulture goes where the pickings are easy— and it is inevitable that they will look afterthemselves. [Interruption.] Conservative Members should not be surprised that we have a grasp of capitalist economics. The oil companies go for profits, and because at present the profits are attractive, they are rushing into the North sea.
The Minister boasted in Texas that the United Kingdom was the fifth largest producer of oil. That is true, but it is not the most prudent oil-producing country. It does not have the fifth largest reserves of oil. There are 20 or 25 countries—there may be more —that have larger oilreserves than we do. They are not boasting that they are in a good position.
While a number of Conservative Members — the speech of the former Secretary of State for Energy, the right hon. Member for Guildford (Mr. Howell) was notable for its complacency—may believe that oil prices in the rest of the 1980s may be less than they were in real terms in 1983, the fact remains that oil is a diminishing resource. The Government cannot expect that the British oil requirement will be met in full for much longer from our reserves. By the middle of the 1990s—I should be delighted if the Under-Secretary would comment on this —we shall be dependent once again. It is a pity that such a short-sighted view exists.
I do not know whether Conservative Members have studied the effect that that will have on a rundown economy which is already in dire difficulty. During the past five years we have seen industrial devastation to an unparalleled extent. That which properly harvested, planned, and depleted could have maintained Britain in some semblance of prosperity has been eagerly rushed at and exploited on the grounds that low prices will continue indefinitely. Even with a further deterioration in the Gulf, with an escalation of the conflict between Iran and Iraq, we are told that we need not worry unduly. That is gambling with the national interest in a way which is utterly reprehensible.
A number of my hon. Friends and one or two Conservative Members asked some questions. I want the Under-Secretary to respond to some of the detailed ones. To assist him, I shall emphasise some of the more significant questions. We are entitled to ask the Under-Secretary to estimate the volume of royalty oil which will accrue in the next year or two. We are entitled to ask him —despite the fact that some of the points will have to be dealt with in Committee—to offer a guarantee about the forced transfer of staff. We are entitled to expect him to say whether he will allow the independent oil companies, in particular the smaller ones, to sell to the agency.
Minnows must still swim. We cannot allow the offshore waters to be feeding grounds merely for the larger, major companies. The minnows must survive. They must have, if they wish, the capacity to trade. The agency must therefore be able to take oil from the smaller independents. If the Government are not prepared to make such a concessionary arrangement, that will once again demonstrate their interest in business, but it is big business that dominates their priorities.
Will the Under-Secretary refer to participation agreements? There has been some confusion about them. I should like to know how many participation agreements


will be on a six-month and how many on a 12-month basis. The relevant information about those agreements should be given.
It was reprehensible of the Minister of State not to deal adequately with BNOC's financial basis. Several of my hon. Friends —

Mr. Rowlands: Unprecedented.

Mr. Hardy: My hon. Friend uses the word unprecedented. I suppose that it is inevitable that if the Minister's advisers are not fully informed about the matter he may wish to leave it until the Bill is in Committee.
The Bill is peculiar in its structure in that certain provisions are made in schedules that I should have thought—I am no lawyer and have no pretensions about having a draftsman's ability — should be in clauses. Since those provisions deal with financial matters, we are entitled to a more credible presentation.
What was BNOC's financial position during the last financial year? Will the Under-Secretary of State say something about the fees which have accrued to BNOC and which may have some relevance to the Department? We wish to know about BNOC's financial structure and the financial structure of the new agency. If the Under-Secretary of State cares to offer an explanation or an apology as to the nature and character of the Bill, which will be in Committee next week, that will be well received, at least by the Opposition.
The House is aware that one of BNOC's important functions is its involvement in committees that consider the technical requirements and problems posed by North sea development. By BNOC's presence on those committees, it acquires information and experience that is available for the public interest. If BNOC were dismantled, a real risk would be faced. Unless the Secretary of State positively instructs the agency to be involved in these committees, his Department and the public interest will be deprived of information and experience which will be sadly missed.
I must end in a few moments because I should hate the Under-Secretary of State not to have sufficient time to answer the questions posed by my hon. Friends. It will be a matter of considerable regret and will make it more difficult for the Government to fulfil their timetable if they cannot provide that information this evening. If they cannot, I trust that the Committee stage will not be far advanced before we receive an explanation of the points that concern us.
BNOC has been criticised for its losses of between £40 million and £50 million. I accept the fact that the Minister of State did not offer that criticism, but other hon. Members have talked about the accumulated losses. Will the Under-Secretary of State confirm that had BNOC—perhaps acting on a ministerial suggestion—not engaged in that activity the losses to the nation would have been scores of times higher than the minimal loss incurred by BNOC's intervention in the market? Any accusation of incompetence or loss making by BNOC needs to be qualified.
I shall make one further reference to the speech made by the Minister of State in Houston which received little attention. I make this point because my constituency is a long way from the sea but is deeply affected by the industrial devastation that has been experienced in so

many parts of Britain since 1979. Because of the need to regenerate our industry, I was delighted to see that the Minister had realised that orders must accrue to British industry and commerce. The right hon. Gentleman needs to be careful, because I do not think that two heretics would be allowed in one Department at the present time. By his perception of the need to promote industrial orders as a result of offshore activity, the right hon. Gentleman departed from the traditional pattern of responsibility in the Department.
When the Labour Government were elected in 1974, they found that only about 20 per cent. of the value of offshore orders was benefiting British commerce and industry. By the time the Labour Government left office in 1979, that share had been built up to almost 80 per cent. It has never touched that level since the present Government took office in 1979. In some areas —pipelines, drilling tools and equipment—over one third of the orders are going to industries in other nations. The Government have always taken the view that they have an obligation to share the benefit of our offshore inheritance with our European partners. Our European partners would not take quite the same attitude if the legacy was theirs.
It is delightful that the Minister now recognises that orders should accrue to Britain. It is a pity that he did not perceive it before or that people such as the right hon. Member for Guildford, who inflicted a great deal of complacency on the House today, did not perceive it earlier. [Interruption.] I am sorry if the right hon. Gentleman feels that I am being unfair, but the share of offshore orders accruing to British industry during his tenure of office fell abysmally, which was sad, and perhaps helped to generate in a small way the enormous growth of unemployment that has so affected us all.

Mr. David Howell: I do not know what figures the hon. Gentleman is quoting, but if he looks at the facts he will see that, although our share of offshore orders is never enough—we would like more for our industry—it rose steadily in the early 1980s, and has achieved some substantial levels. My noble Friend Lord Gray of Contin, who was Minister of State at that time, was able to tell the House of some encouraging figures. Therefore, I wonder whether the hon. Gentleman has got his facts right.

Mr. Hardy: I have got my facts absolutely right. The right hon. Gentleman need only look at the Brown Book that he issued when he was in office and the ones that have been issued since then to see that over the past year there has been a slight improvement in most sectors of the offshore market, but the fact remains that there was a decline after 1979. I recall asking the right hon. Gentleman a question about the matter when he was Secretary of State. I said that there had been a disappointing fall. I was given the explanation that in 1979 there had been some particularly large orders that had benefited British industry. Ministers said that it was reasonable for us to operate on a 60 per cent. to 64 per cent. share. In fact, Britain's unemployment problem is now so severe that we cannot possibly allow our share of, for example, drilling equipment or pipeline orders to be as low as 61 or 62 per cent., which it has been in the past few years. The right hon. Gentleman can look at the record of the Department of Energy. It is published, and it is clear.
I do not believe that I have anything to apologise for. None of my right hon. Friends and hon. Friends who spoke


in the debate about an institution that could continue to serve the nation has anything to be ashamed of. We are entirely right and justified in asking the House to vote against this pernicious and nasty, if consistent, Bill.

The Parliamentary Under-Secretary of State for Energy (Mr. Alastair Goodlad): With the debates on the two reports from the Select Committee on Energy and a full day's debate today, the House has had extensive opportunities in this Session to consider the recent developments in the structure of the oil market. I should like to join my right hon. Friend the Minister of State and the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) in their tributes to the work of the Select Committee and in what they said about the directors and staff of BNOC.
We have had many knowledgable and constructive speeches. I intend to respond to as many as I can of the main points that my hon. Friends and Opposition Members have raised. The detailed issues can be considered in Committee.
The Bill is a modest measure. The hon. Member for Wentworth (Mr. Hardy) asked me to comment on its format. There is no need for any apology. It establishes a small successor body to BNOC, and the structure of the Bill is appropriate for that body. The Government's reasons for abolishing BNOC and for retaining the small number of the corporation's functions that continue to be needed have been fully explained to the House.
Since my right hon. Friend the Minister of State's announcement of 13 March, we have moved swiftly to prepare the Bill and to lay the ground for setting up the new agency. The management of BNOC has made vast progress to rid itself of the supplies which put its finances at risk, and has urgently sorted out redundancy payments for staff who will not be transferred to the agency so that they may know where they stand as early as possible.
The Government have not followed the suggestions of some Opposition Members who, it seems, would have preferred BNOC to have remained, like King Canute, immovable on the beach while the tide of the changed structure in the oil market engulfed it. We must remember that world oil prices are determined by the balance between supply and demand. Neither the Government nor BNOC has wished or been able to affect that. An alternative Government containing Opposition Members might wish it were otherwise, but such wishes are hypothetical. What has been crucial is the avoidance of any actions that could have destabilished the market. That is why, when BNOC disposed of large amounts of crude under term contracts, it ensured that its pricing proposals were handled delicately. Within moments, on a market dominated by spot and spot-related transactions, the corporation's slight capacity to promote stability changed into a potential for promoting instability. In those circumstances, if BNOC's abolition has any effect on the world market, it will be beneficial.
No action by BNOC, even if its board were comprised of omniscient angels, could have averted the market change. The management and staff coped admirably in circumstances that proved to be impossible.
For other hon. Members—in general they are not on the Opposition Benches—the Bill has not been radical enough. Some of my hon. Friends have argued that, having proposed the discontinuation of some of BNOC's

functions, we should have gone the whole hog. The Government would not wish to lay claim to such omniscience. There has been a change in market structures which was not envisaged by either party when BNOC was established and which was scarcely envisaged when Britoil was privatised 30 months ago. The market structure might change again. If we have destroyed participation agreements, we might live to regret it in the event of such a change. It remains the Government's view that the Bill strikes the right balance.
Several Opposition Members have charged the Government, and especially my right hon. Friend the Minister of State, with inconsistency. That is not justified. The Government have recognised and reacted to changes. The Government and BNOC cannot influence oil prices in the longer term, and do not wish to do so. In so far as BNOC has any influence in the short term, it rightly exerted that influence to avoid destabilising the oil market. Last July, the spot market plunged on account of temporary destocking and rumours of large barter deals by producing countries. This appeared to be a short-term speculative move. BNOC accordingly and correctly maintained the prices that it paid to suppliers, which were intended to be term prices. To have reduced them would have been to confirm and reinforce current speculation and to have risked setting off a competitive downward spiral of term prices.
BNOC reduced prices in October in response to a change in market fundamentals which had reduced the value of light crudes such as those from the North sea as compared with heavier crudes from the middle east and South America. Speculative downward pressures reappeared and, for much of the past nine months. the spot prices at which BNOC has had to sell its oil are lower than the term prices at which it had to purchase its barrels. In such circumstances, a loss was inevitable. This has happened before. In the debate on the Oil and Gas (Enterprise) Bill the right hon. Member for Morley and Leeds, South (Mr. Rees) referred to losses in the summer of 1981. If, by reducing its prices, BNOC had enhanced speculative pressures, its losses could have been magnified.
Right hon. and hon. Members have accused the Government of propping up the oil price. That is utterly false for, as I have explained, we are unable to alter the level of prices in the world market. Sharp movements of oil prices are in nobody's interests. A sharp fall adds to the risks of the world banking system, threatens Important debtor countries, and reduces the incentive to energy conservation and substitution away from oil. That would risk making us again, in a few years' time, a captive of OPEC, and the sharp rise that would follow such a fall would damage world economic prospects.

Mr. Gordon Wilson: I absolve the Minister of any real attempt to prop up world oil prices, and would condemn the Government for having failed to do so. However, does not the Minister realise that it is over-production from the North sea's Scottish sector, together with production from Mexico and the Norwegian sector, that is swamping the world market and contributing to the downward pressure? In that respect, the Minister is a victim of over-production and of inadequacies of policy.

Mr. Goodlad: I am interested to hear that the Scottish National party would wish to slow down the development


of the North sea. Perhaps we should reflect on the effect of that on job prospects in Scotland. However, since the hon. Gentleman has only just joined the debate, he will not have heard what has been said on the subject.
In the past, BNOC's pricing arrangements could make a slight contribution to averting the danger of violent price changes. However, with the change in market structures, they have become a potential for sparking off such violent changes.
The hon. Member for Merthyr Tydfil and Rhymney asked for an assurance about the sale of royalty in kind. I assure him that there is no commitment on either BNOC or the agency to sell back to the producers any royalty in kind in oil that licensees produce. I was also asked about the value of the royalty oil sold in the current financial year. It was worth just over £2·2 billion. Royalty oil comprises roughly 10 per cent. of all oil production from the United Kingdom's continental shelf.
The hon. Member for Merthyr Tydfil and Rhymney and the hon. Member for Wentworth asked for an unusual assurance — that no BNOC staff should be forced to transfer to the agency. As, fortunately, the Socialist state has not yet dawned in this country the Government have neither means nor intention of forcing BNOC staff to transfer. What is important is that those members of staff who will be offered jobs in the agency should soon be identified and that the board of BNOC should make known what redundancy payments will be made to those not required. I believe that that has now been done.
The hon. Member for Merthyr Tydfil and Rhymney asked about BNOC's finances after the Supplementary Estimates approved by the House in December and March. My Department made grants totalling £67,209,000 to the corporation under section 6 of the Oil and Gas (Enterprise) Act 1982. Those payments restored the financial reserves to a level that should be more than adequate to enable BNOC to meet all commitments liable to arise prior to the transfer of its residual assets and liabilities to the new agency.
The hon. Member for Merthyr Tydfil and Rhymney also asked about BNOC's institutional arrangements. BNOC was unique as a seller of oil in that its announced price was even more a price applicable to its suppliers than to its customers. The effects of its secure access and pricing provisions and the participation agreements is that it has had to propose uniform transparent prices. That has precluded any hidden discounts, barter deals or processing arrangements. Statoil, which sells only oil, was in quite a different position. That uniform transparent price achieved symbolic significance, so that any change in it was not really neutral but carried the risk of destabilising the market, as my hon. Friend the Member for Erewash (Mr. Rost) demonstrated with his usual eloquence.
The hon. Member for Merthyr Tydfil and Rhymney also made a plea, in his usual impassioned way, to the effect that the agency should sell the oil produced by small independent companies. There are four reasons why I do not accept that it is necessary for a public sector body to be involved in such trading. First, many small producers existed, and operated satisfactorily, before BNOC was created. Secondly, the policy of participation halved the availability of their production and so made it more difficult for the small companies to trade the remainder. Thirdly, the hon. Gentleman said that 20 years ago the

major refineries refused to purchase oil from the independents. Similarly, I suspect that the difficulties anticipated by Westar in its evidence to the Select Committee were based on the world of 20 years ago. Then the major companies had potential oil production in excess of their refinery needs. Now their refinery needs are greater than their supplies, and they are eager to contract oil from independent producers. I suspect that Opposition Members may be living in the 1960s rather than today.
Fourthly, the danger of allowing the agency to act as a marketer for small companies is that it would yet again get into the business of setting a price to its suppliers. It would then run the same risk of destabilising the market as BNOC has run during the past few months.
My right hon. Friend the Minister referred to the assurances given by the oil companies on the security of supply. The hon. Member for Merthyr Tydfil and Rhymney and the right hon. Member for Glasgow, Govan (Mr. Milian) poured cold water on that. I cannot disclose the details because they are commercially confidential. The assurances do not have the legally binding force of contracts. I should be surprised if the right hon. and hon. Gentlemen were suggesting that companies of that size, which are dependent on their United Kingdom operation for their economic success, would risk going back on their word. If that is so, what is the use of participation? The British motorist cannot burn crude oil in his engine, nor the textile mills in their boilers. They require products which, whoever supplies the crude, must come from private companies, which Opposition Members consider to be unreliable. My hon. Friend the Member for Enfield, Southgate (Mr. Fortino) was accurate in his analysis of that point.
The right hon. Member for Govan pointed out that it would be several months after participation options were reactivated before oil would flow to the agency again. Several other hon. Members also probed how the security of supply would be preserved. It is correct that lead times of several months are built into the participation agreements. However, we should consider the position if participation options were already being exercised.
If the agency were by then able to sell the oil on term contracts, it would need many months to get out of those contracts to supply more oil to Britain. It would be reluctant to do so in case it spoilt its market when circumstances returned to normal. That happened in the late 1970s. What if the agency were obliged to sell its participation spot as BNOC must do now? There is no reason why the refining companies in the United Kingdom should not equally be able to buy that oil spot. BNOC claims to have diverted 100,000 barrels a day to United Kingdom companies in 1979. That is 12 months or more after the crisis of that time had started. The increase in all United Kingdom oil supplies between 1978 and 1979 amounts to only 30,000 barrels a day — less than the addition to the companies' own supplies from the North sea.
The oil companies which received BNOC's supplies must have diverted other supplies from the United Kingdom. Our increase of 30,000 barrels a day—about 2 per cent. of our demand—compares with increases of 11 per cent. to France, 15 per cent. to West Germany and 10 per cent. to the Netherlands. Moreover, United Kingdom stocks in that period increased by more than 30,000 barrels a day. Therefore, in spite of active participation, or possibly because of it, supplies to the


United Kingdom increased by less than supplies to our continental neighbours, and none of the increase reached our consumers.
Reference has been made to the Energy Act 1976, which gives my right hon. Friend the Secretary of State for Energy comprehensive powers to control production, supply, acquisition, use and price of crude oil and oil products. Similarly, reference was made to the International Energy Agency arrangements.

My hon. Friend the Member for Exeter (Mr. Hannan): asked what would trigger the Secretary of State's consent to reactivation of participation and the assurances given by the oil companies. On the latter, there is no question in general of triggering; the assurances are an ongoing recognition of the companies' responsibilities to the British market. On the former, I would not wish to be precise. There will be no question of an international trigger. It would be for the Government of the day to decide whether the threat to world oil supplies had become sufficiently close to justify the disturbance which reactivation would create.
My hon. Friend also drew attention to the queues in Britain in the late 1970s compared with the adequacy of supplies on the Continent. May that not have happened because of Government intervention on participation and —much more devastating—price control?
The hon. Member for Merthyr Tydfil and Rhymney drew attention to the remarks made by my right hon. Friend the Minister of State last December on tax reference prices, and the right hon. Member for Govan questioned whether the abolition of BNOC would result in a lack of information on the pricing of oil for taxation purposes. In fact, there is substantial evidence of spot prices published in the trade press. The oil taxation office is confident that fair arm's length prices can be established for valuing oil traded within the individual companies. The oil taxation office has plenty of expertise, and, the right hon. Gentleman will be relieved to know, plenty of accountants. The corporation's contribution to tax valuation came from its ability to find a firm market-related term price acceptable to both producers and customers. It did not come from grassing to the oil taxation office on the disgraceful habits of the oil companies. Once BNOC could no longer find a term price acceptable to producers and consumers, it was no longer able to contribute to tax valuations.
My right hon. Friend the Member for Guildford (Mr. Howell), in a thoughtful speech that demonstrated his considerable knowledge of this subject, asked why the Government should continue to take royalty in kind oil. Taking royalty in kind provides the Government with some oil immediately available during an interruption to world oil supplies, so long as that oil is not being sold on long-term contracts. It also provides a quantity of oil that can be sold at arm's length and, therefore, offers some protection should the open market for United Kingdom continental shelf oil be threatened.
The hon. Member for Merthyr Tydfil and Rhymney questioned my right hon. Friend's announcement today about LPG trading. The removal of the public sector in LPG trading is unlikely to have a major impact on prices. BNOC was handling less than 30 per cent. of United Kingdom continental shelf production, and less than 20 per cent. of total United Kingdom output, including that from refineries. BNOC's influence with the market was, therefore, not wide ranging and the ending of this trading

role will have little influence on the market. It is unlikely that the business would remain viable without the volume provided under participation.
Our discussions with the LPG industry lead us to expect that a company or group will soon emerge to fill the role of BNOC in collecting small parcels of LPG from producers who have only small quantities available. I do not believe that small producers' interests will be disadvantaged in any way.
The right hon. Member for Govan claimed that the Government had no depletion policy. The hon. Member for Gordon (Mr. Bruce), on behalf of the Liberal party, suggested that the depletion policy should be reconsidered, although it was not clear how his party would do that. It is the Government's objective to promote the successful exploration for and maximum economic recovery of the United Kingdom's petroleum resources. That policy lay behind the major fiscal changes in 1983, and the Government have been encouraged by the oil industry's response to those measures in the acceleration of exploration and development programmes.
At the same time, the pace of development has been considerably helped by the industry being free from artificial and arbitrary controls on production. Licensees are free to manage production from their fields within a framework of consents or approvals based on the requirements of good oilfield practice and tight controls on gas flaring. It would clearly not be consistent with the Government's policy to impose arbitrary restrictions on the output from producing fields in the present circumstances. The Government of which the right hon. Member for Govan was so prominent a member recognised that point clearly when Mr. Varley, then Secretary of State, had to give licensees detailed assurances that he would not use the powers that he was about to take.
The Government retain reserve powers to limit United Kingdom continental shelf oil production, but, as the Select Committee on Energy's third report in 1982 recognised, the circumstances in which they might be used would relate to specific and overriding circumstances in the national interest or to a radical change in circumstances pertaining to the United Kingdom continental shelf and its development. A move to cut United Kingdom production now would impose clear and tangible losses on the nation, while there is great uncertainty about potential benefits, given that the United Kingdom has only 5 per cent. of world oil production.
Therefore, the use of those powers in the present market circumstances is unjustified. Perhaps Liberal Members believe that, with the help of the wise and the good, they can quantify the benefits of cutting production. I remind them that, only four years ago, the wise and the good were confidently forecasting ever-increasing oil prices.
The right hon. Member for Govan raised the question of the effects on the staff of the suddenness of the announcement of the abolition of BNOC. My right hon. Friend would have wished to avoid the sudden nature of the announcement, but there was no alternative to the most strict secrecy, given the opportunities for speculation that any rumours could have given. The right hon. Member also complained that the Bill hands over the oil business to the private companies. What business? All oil is produced by private companies, refined by private companies and distributed to British consumers by private companies. BNOC has been taking oil from one private
company and disposing of it to another. I wish that I could claim that the Bill advanced the Government's privatisation programme, but I fear that I cannot.

Mr. Hardy: It would be remiss of us not to thank the Under-Secretary for attempting to answer a number of detailed questions. However, I trust that before he concludes he will offer some comment about schedule 3 and in particular the almost unprecedented nature of the Government's approach in presenting a Bill on the financial structure of the agency and not yet having said a word about it.

Mr. Goodlad: A large number of matters need to be covered, and I shall come to that important point if I have time.
It is instructive to recall the reaction to my right hon. Friend's announcement on 13 March. The Times, in a leader, talked of
the intrinsic rightness of the Government's decision
and went on to report that the timing of the announcment was being described within the oil industry as "masterful". Even The Guardian, not normally the most vociferous of our supporters, reported the abolition of BNOC as
the boldest step this Government has taken in the energy field." The oil markets and the foreign exchange markets reacted calmly to the announcement.
Many OPEC leaders recognised that the opportunties that had been available to BNOC in the past to stabilise the market had disappeared as the structure of the oil market had changed. Our colleagues in Europe and the United States greeted the news with unqualified approval, although many of them were not surprised.
Our critics claim that we shall be weakening our control over the destination of North sea oil, but that is incorrect. The ability to use the participation agreements when they are useful for security of supply will not be affected by these proposals, and the landing requirement for North Sea oil will remain unchanged.
It is perhaps a little difficult to discern the basis for the resistance to the Bill of hon. Members opposite but I suspect that it derives from their simple beliefs that the national interest is best served by expanding the public sector as far as possible, and that state control is preferable to private sector initiative. Perhaps they feel that the defence of the public sector against the supposed attacks of the Government should be proclaimed at every opportunity, even if they cannot work out how that philosophy should be applied to the unusual circumstances of BNOC. Or perhaps they think that the enunciation of some sound Socialist principles, however fatuous, will go down well with their constituency parties.
I hope that on further reflection they will recognise that, given the change in the structure of the oil market, it is clear to all that no responsible Government of any colour could have proposed measures very different from those set out in the Bill.
In a decade, Government policy towards state involvement in the development of North sea oil has turned full circle. Ten years ago almost to the week, the House was debating the Second Reading of the Petroleum and Submarine Pipe-lines Bill. That provided for the establishment of BNOC as an instrument of state involvement and so-called public ownership in the North sea such as would satisfy the most doctrinaire of Socialists.
All that has changed. In 1982, the Government put BNOC's exploration and production business into a new company, Britoil, and transferred these activities to where they rightly belonged—the private sector. The effects of our removing the dead hand of the state from the North sea has been dramatic. In 1983, a record number of 128 offshore exploration and appraisal wells were drilled on the United Kingdom continental shelf. Last year heralded a major increase of 15 per cent. in our gas reserves.
All of these achievements reflect the Government's careful nurturing of the North sea, and it is a record of which we are justifiably proud. In the context of this substantial level of activity in the North sea, the new agency will have a modest role. The Bill is in the interests of both the British oil industry and the country. Therefore, I warmly commend it to the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 264, Noes 159.

Division No. 206]
[10 pm


AYES


Adlaey, Robert
Coombs, Simon


Aitken, Jonathan
Cope, John


Alexander, Richard
Cormack, Patrick


Alison, Rt Hon Michael
Couchman, James


Amess, David
Cranborne, Viscount


Ancram, Michael
Crouch, David


Arnold, Tom
Currie, Mrs Edwina


Ashby, David
Dickens, Geoffrey


Aspinwall, Jack
Dorrell, Stephen


Atkins, Robert (South Ribble)
Dover, Den


Baker, Rt Hon K. (Mole Vall'y)
du Cann, Rt Hon Sir Edward


Baker, Nicholas (N Dorset)
Dunn, Robert


Baldry, Tony
Durant, Tony


Banks, Robert (Harrogate)
Dykes, Hugh


Batiste, Spencer
Eggar, Tim


Beaumont-Dark, Anthony
Evennett, David


Bellingham, Henry
Eyre, Sir Reginald


Bendall, Vivian
Fairbairn, Nicholas


Bennett, Rt Hon Sir Frederic
Finsberg, Sir Geoffrey


Benyon, William
Fletcher, Alexander


Best, Keith
Fookes, Miss Janet


Bevan, David Gilroy
Forman, Nigel


Biggs-Davison, Sir John
Forsyth, Michael (Stirling)


Blaker, Rt Hon Sir Peter
Forth, Eric


Body, Richard
Fowler, Rt Hon Norman


Boscawen, Hon Robert
Fox, Marcus


Bottomley, Peter
Franks, Cecil


Bottomley, Mrs Virginia
Fraser, Peter (Angus East)


Bowden, A. (Brighton K'to'n)
Freeman, Roger


Bowden, Gerald (Dulwich)
Fry, Peter


Braine, Rt Hon Sir Bernard
Gale, Roger


Brandon-Bravo, Martin
Gardiner, George (Reigate)


Bright, Graham
Garel-Jones, Tristan


Brinton, Tim
Gilmour, Rt Hon Sir Ian


Brooke, Hon Peter
Glyn, Dr Alan


Brown, M. (Brigg &amp; Cl'thpes)
Goodlad, Alastair


Bruinvels, Peter
Gower, Sir Raymond


Bryan, Sir Paul
Grant, Sir Anthony


Buchanan-Smith, Rt Hon A.
Greenway, Harry


Bulmer, Esmond
Gregory, Conal


Burt, Alistair
Ground, Patrick


Butcher, John
Gummer, John Selwyn


Butler, Hon Adam
Hamilton, Neil (Tatton)


Carlisle, Kenneth (Lincoln)
Hampson, Dr Keith


Cash, William
Hanley, Jeremy


Chapman, Sydney
Hannam, John


Chope, Christopher
Hargreaves, Kenneth


Clark, Hon A. (Plym'th S'n)
Harris, David


Clark, Dr Michael (Rochford)
Harvey, Robert


Clark, Sir W. (Croydon S)
Haselhurst, Alan


Clarke, Rt Hon K. (Rushcliffe)
Hawksley, Warren


Clegg, Sir Walter
Hayes, J.


Cockeram, Eric
Hayward, Robert


Colvin, Michael
Heathcoat-Amory, David






Henderson, Barry
Roe, Mrs Marion


Hickmet, Richard
Rossi, Sir Hugh


Hicks, Robert
Rost, Peter


Higgins, Rt Hon Terence L.
Rowe, Andrew


Hind, Kenneth
Rumbold, Mrs Angela


Hirst, Michael
Ryder, Richard


Hogg, Hon Douglas (Gr'th'm)
Sackville, Hon Thomas


Holland, Sir Philip (Gedling)
Sainsbury, Hon Timothy


Holt, Richard
Shaw, Giles (Pudsey)


Hordern, Peter
Shaw, Sir Michael (Scarb')


Howarth, Alan (Stratf'd-on-A)
Shelton, William Streatham)


Howell, Rt Hon D. (G'ldford)
Shepherd, Colin (Hereford)


Howell, Ralph (N Norfolk)
Shepherd, Richard (Aldridge)


Hunt, David (Wirral)
Silvester, Fred


Hunt, John (Ravensbourne)
Sims, Roger


Hunter, Andrew
Smith, Tim (Beaconsfield)


Irving, Charles
Speed, Keith


Jackson, Robert
Speller, Tony


Jessel, Toby
Spence, John


Johnson Smith, Sir Geoffrey
Spencer, Derek


Jones, Gwilym (Cardiff N)
Spicer, Michael (S Worcs)


Jones, Robert (W Herts)
Squire, Robin


Joseph, Rt Hon Sir Keith
Stanbrook, Ivor


Kellett-Bowman, Mrs Elaine
Stanley, John


Key, Robert
Steen, Anthony


King, Roger (B'ham N'field)
Stern, Michael


Knight, Gregory (Derby N)
Stevens, Lewis (Nuneaton)


Knowles, Michael
Stevens, Martin (Fulham)


Knox, David
Stewart, Allan (Eastwood)


Lamont, Norman
Stewart, Andrew (Sherwood)


Latham, Michael
Stewart, Ian (N Hertf'dshire)


Lawler, Geoffrey
Stokes, John


Lawrence, Ivan
Stradling Thomas, J.


Lawson, Rt Hon Nigel
Sumberg, David


Leigh, Edward (Gainsbor'gh)
Taylor, John (Solihull)


Lennox-Boyd, Hon Mark
Taylor, Teddy (S'end E)


Lester, Jim
Tebbit, Rt Hon Norman


Lilley, Peter
Temple-Morris, Peter


Lloyd, Ian (Havant)
Terlezki, Stefan


Lloyd, Peter, (Fareham)
Thatcher, Rt Hon Mrs M.


Lord, Michael
Thomas, Rt Hon Peter


Luce, Richard
Thompson, Donald (Calder V)


McCrindle, Robert
Thompson, Patrick (N'ich N)


McCurley, Mrs Anna
Thorne, Neil (Ilford S)


MacKay, John (Argyll &amp; Bute)
Thornton, Malcolm


Maclean, David John
Thurnham, Peter


McQuarrie, Albert
Townend, John (Bridlington)


Major. John
Tracey, Richard


Maples, John
Trippier, David


Mather, Carol
Trotter, Neville


Maude, Hon Francis
Twinn, Dr Ian


Maxwell-Hyslop, Robin
van Straubenzee, Sir W.


Merchant, Piers
Vaughan, Sir Gerard


Meyer, Sir Anthony
Viggers, Peter


Mills, Iain (Meriden)
Wakeham, Rt Hon John


Mills, Sir Peter (West Devon)
Walden, George


Miscampbell, Norman
Walker, Bill (T'side N)


Mitchell, David (NW Hants)
Wall, Sir Patrick


Monro, Sir Hector
Waller, Gary


Morrison, Hon C. (Devizes)
Ward, John


Neale, Gerrard
Wardle, C. (Bexhill)


Needham, Richard
Watson, John


Nelson, Anthony
Watts, John


Neubert, Michael
Wells, Bowen (Hertford)


Nicholls, Patrick
Wells, Sir John (Maidstone)


Normanton, Tom
Wheeler, John


Oppenheim, Rt Hon Mrs S.
Whitfield, John


Osborn, Sir John
Whitney, Raymond


Page, Sir John (Harrow W)
Winterton, Mrs Ann


Parris, Matthew
Winterton, Nicholas


Porter, Barry
Wolfson, Mark


Portillo, Michael
Wood, Timothy


Powell, Rt Hon J. E. (S Down)
Woodcock, Michael


Powell, William (Corby)
Yeo, Tim


Prentice, Rt Hon Reg
Young, Sir George (Acton)


Raffan, Keith
Younger, Rt Hon George


Rathbone, Tim



Rhodes James, Robert
Tellers for the Ayes:


Ridley, Rt Hon Nicholas
Mr. Archie Hamilton and


Roberts, Wyn (Conwy)
Mr. Ian Lang.





NOES


Adams, Allen (Paisley N)
Janner, Hon Greville


Anderson, Donald
John, Brynmor


Archer, Rt Hon Peter
Jones, Barry (Alyn &amp; Deeside)


Ashley, Rt Hon Jack
Kaufman, Rt Hon Gerald


Atkinson, N. (Tottenham)
Kilroy-Silk, Robert


Bagier, Gordon A. T.
Kinnock, Rt Hon Neil


Barnett, Guy
Lambie, David


Barron, Kevin
Lamond, James


Beckett, Mrs Margaret
Leadbitter, Ted


Bell, Stuart
Leighton, Ronald


Benn, Tony
Lewis, Ron (Carlisle)


Bennett, A. (Dent'n &amp; Red'sh)
Lewis, Terence (Worsley)


Bermingham, Gerald
Litherland, Robert


Bidwell, Sydney
Lloyd, Tony (Stretford)


Blair, Anthony
Loyden, Edward


Boyes, Roland
McCartney, Hugh


Bray, Dr Jeremy
McDonald, Dr Oonagh


Brown, Hugh D. (Provan)
McKelvey, William


Brown, N. (N'c'tle-u-Tyne E)
McNamara, Kevin


Brown, R. (N'c'tle-u-Tyne N)
McTaggart, Robert


Buchan, Norman
McWilliam, John


Caborn, Richard
Madden, Max


Callaghan, Rt Hon J.
Marek, Dr John


Callaghan, Jim (Heyw'd &amp; M)
Marshall, David (Shettleston)


Campbell, Ian
Martin, Michael


Campbell-Savours, Dale
Mason, Rt Hon Roy


Canavan, Dennis
Maxton, John


Carter-Jones, Lewis
Maynard, Miss Joan


Clark, Dr David (S Shields)
Meacher, Michael


Clarke, Thomas
Michie, William


Clwyd, Mrs Ann
Mikardo, Ian


Cocks, Rt Hon M. (Bristol S.)
Millan, Rt Hon Bruce


Cohen, Harry
Miller, Dr M. S. (E Kilbride)


Concannon, Rt Hon J. D.
Mitchell, Austin (G't Grimsby)


Cook, Frank (Stockton North)
Morris, Rt Hon A. (W'shawe)


Cook, Robin F. (Livingston)
Morris, Rt Hon J. (Aberavon)


Corbett, Robin
Oakes, Rt Hon Gordon


Cowans, Harry
O'Brien, William


Craigen, J. M.
Orme, Rt Hon Stanley


Crowther, Stan
Park, George


Davis, Terry (B'ham, H'ge H'l)
Parry, Robert


Deakins, Eric
Patchett, Terry


Dewar, Donald
Pavitt, Laurie


Dixon, Donald
Pendry, Tom


Dobson, Frank
Pike, Peter


Dormand, Jack
Powell, Raymond (Ogmore)


Douglas, Dick
Prescott, John


Duffy, A. E. P.
Randall, Stuart


Dunwoody, Hon Mrs G.
Redmond, M.


Eadie, Alex
Rees, Rt Hon M. (Leeds S)


Eastham, Ken
Richardson, Ms Jo


Ellis, Raymond
Roberts, Allan (Bootle)


Evans, John (St. Helens N)
Roberts, Ernest (Hackney N)


Ewing, Harry
Robertson, George


Fatchett, Derek
Robinson, G, (Coventry NW)


Field, Frank (Birkenhead)
Rooker, J. W,


Fisher, Mark
Rowlands, Ted


Foot, Rt Hon Michael
Sheerman, Barry


Forrester, John
Sheldon, Rt Hon R.


Fraser, J. (Norwood)
Short, Ms Clare (Ladywood)


Freeson, Rt Hon Reginald
Skinner, Dennis


George, Bruce
Smith, C.(Isl'ton S &amp; F'bury)


Gould, Bryan
Smith, Rt Hon J. (M'kl'ds E)


Gourlay, Harry
Snape, Peter


Hamilton, James (M'well N)
Soley, Clive


Hamilton, W. W. (Central Fife)
Spearing, Nigel


Hardy, Peter
Strang, Gavin


Harman, Ms Harriet
Straw, Jack


Harrison, Rt Hon Walter
Thomas, Dr R. (Carmarthen)


Hart, Rt Hon Dame Judith
Thompson, J. (Wansbeck)


Healey, Rt Hon Denis
Thorne, Stan (Preston)


Heffer, Eric S.
Tinn, James


Holland, Stuart (Vauxhall)
Torney, Tom


Horne Robertson, John
Wardell, Gareth (Gower)


Howell, Rt Hon D. (S'heath)
Weetch, Ken


Hoyle, Douglas
Welsh, Michael


Hughes, Dr. Mark (Durham)
Williams, Rt Hon A.


Hughes, Roy (Newport East)
Wilson, Gordon


Hughes, Sean (Knowsley S)
Winnick, David






Young, David (Bolton SE) and
Mr. Frank Haynes



Mr. Allen McKay

Tellers for the Noes:

Question accordingly agreed to.
Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).

BUSINESS OF THE HOUSE

Ordered,

That, at this day's sitting, the Ports (Finance) Bill may be proceeded with, though opposed, until any hour.—[Mr. Sainsbury.]

OIL AND PIPELINES BILL [MONEY]

Queen's Recommendation having been signified— 
Resolved,
That, for the purposes of any Act resulting from the Oil and Pipelines Bill ('the Act'), it is expedient to authorise:—

(a) the payment out of money provided by Parliament of sumes required by the Secretary of State for defraying expenditure of, or making grants to, the Oil and Pipelines Agency ('the Agency');
(b) the payment out of the Consolidated Fund of sums required by the Treasury for fulfilling any guarantee given by them under the Act;
(c) the payment out of the National Loans Fund of sums required by the Secretary of State for making loans to the Agency;
(d) the payment of any sums into the Consolidated Fund or the National Loans Fund.—[Mr. Sainsbury.]

Ports (Finance) Bill

Not amended (in the Standing Committee), considered

New Clause 1

SAFEGUARDING OF FAIR COMPETITION

'The Secretary of State shall not make any grant, loan or guarantee under the provisions of this Act or the Ports (Financial Assistance) Act 1981 save on condition that the same is applied so as not to alter the relative competitive position of any employer of registered dock workers.'.—[Mr. Chope.]

Brought up, and read the First time.

Mr. Christopher Chope: I beg to move, That the clause be read a Second time.
I do not expect the clause or the second group of amendments which you have selected, Mr. Speaker, to result in Divisions. I hope that I can draw to the attention of my right hon. Friend the Secretary of State my important reservations about the Bill.
My first reservation concerns the increase in public expenditure contemplated by the Bill—£180 million—and whether there are sufficient safeguards of the taxpayers' interests, especially having regard to the financial record of the Port of London Authority and the Mersey Docks and Harbour Board.
My second reservation is that, if we have to pour another £180 million of taxpayers' money into subsidising our ports, we should do so in an even-handed and non-discriminatory fashion. It is to that second point that the new clause is especially directed.
There are three categories of port, and I shall list them in order of privilege. First there are the ports outside the national dock labour scheme. Felixstowe is a prime example of that, and there was a debate about it last night. Those privileged ports are unencumbered by the national dock labour scheme: they are free to bargain terms and conditions with their work forces in accordance with privately arranged agreements.
The second category comprises the ports of London and Liverpool. They are national dock labour scheme ports, weighed down by the burdens of the scheme. However, to a large extent, they are relieved of their burdens by the generosity of this Government's legislation.
The third category comprises the other scheme ports which have to survive without the subsidies that are given to London and Liverpool but which have the millstone of the national dock labour scheme levy around their necks. Principal among those least privileged ports is Southampton.
I understand the Government's policy to be to promote free, open and unsubsidised competition between our many ports. My right hon. Friend the Secretary of State said on Second Reading that it is right that in a competitive industry we should insist upon an equitable framework for competition.
My right hon. Friend the Secretary of State for Social Services was even more explicit five years ago when he was Secretary of State for Transport. He said:
The Government basically believe that the ports of this country should operate in full competition with one another and meet the normal tests of commercial viability.
It would be unfair to other ports and to British industry generally if we were to pursue any other policy. My concern is that expressions of good intention by Ministers have not been realised.
We began down the road of steadily increasing subsidies to the otherwise bankrupt ports of London and Liverpool in 1980. The Port of London (Financal Assistance) Act 1980 gave £70 million towards to the cost of severing registered dock workers and other staff and for grants, loans and guarantees. The then Minister referred to the strict financial limit as an inherited obligation from the Labour Government. He warned that problems such as those facing the PLA could become permanent if the limit of Government help was not clearly spelt out.
In the Act the limit of Government help was spelt out at a maximum of £70 million—would that that was so today. This Bill proposes that the limit should be raised yet again to a new ceiling of £500 million. My hon. Friend the
Parliamentary Secretary was explicit in 1980 when he said:
The aim set for the PLA is to cope with its major problems and to return to profitability by 1983.
He expanded on that by stating that he included within the definition of a return to profitability
the need for it to service its capital debt, just as any other business does."—[Official Report, 16 April 1980; Vol. 982, c. 1313–79.]
Would that the Port of London Authority had returned to profitability even on the basis that it was not servicing its capital debt. It is far from being in a profitable position today. I am much concerned that nothing that my right hon. Friend or my hon. Friend the Minister of State has said has indicated that there will ever be an end to the open-ended subsidy that is now going to certain ports.

Mr. John Prescott: Southampton included.

Mr. Chope: The subsidy that is going to the port of Southampton is minimal.

Mr. Prescott: Oh.

Mr. Chope: The hon. Gentleman tries to pooh-pooh that, but under the Bill the subsidy that will go to the port of Southampton is limited to a share of £10 million in the first instance with a maximum of £40 million, whereas its principal competitors, the ports of London and Liverpool, are getting £140 million extra. In other words, their subsidy is being increased from £360 million to £500 million. That is just for those two ports alone. If the hon. Member think that that is fair shares, certainly the dockers in Southampton and their Members of Parliament do not agree.

Mr. Peter Snape: The new clause refers specifically to
the relative competitive position of any employer of registered dock workers.
The hon. Members seems to be complaining that the subsidy for Southampton compared to that for Merseyside
or London is too small. Is that the point that he is seeking to make? If so, he is making it very badly.

Mr. Chope: The point that I make is that the subsidy that is going into London and Liverpool is far in excess of the subsidy for any of the other scheme ports, that that subsidy has been largely wasted in the past and that such limited subsidy as is going to Southampton and scheme ports other than London and Liverpool is far too little compared with what London and Liverpool are getting. My private view is that the ports of London and Liverpool should have been allowed to go bankrupt a long time ago. If that had happened the port of Southampton would be thriving to a far greater extent than it is.

Mr. Simon Hughes: rose —

Mr. Chope: I do not question the sincerity with which my right hon. Friend spoke in 1980 in the debate on the Port of London (Financial Assistance) Bill, but the sad reality is that there is no evidence that the port of London is any nearer profitability than it was in 1980, despite financial assistance of over £ 170 million. Of that, £45· 4 million was for registered dock worker severance, £ 56· 9 million for the severance of non-registered dock workers and £ 68· 1 million for guarantee loan deficit grant and written-off debt.
On the basis that all scheme ports have benefited from the £ 45· 4 million subsidy for registered dock worker severance, the payments to the Port of London Authority in breach of the principle of fair competition enurticated in the new clause total £125 million since 1980. That sum has been ploughed into the Port of London Authority in unfair competition with other ports.
It is perhaps fortunate for other ports that the Port of London Authority has not used that subsidy solely to improve its competitive position. Much of it has been frittered away in subsidising strikes, restrictive practices and employee terms and conditions which are generous to say the least.
The sad aspect of the subsidies that are going into our ports is that they are going to people who are earning £190 a week or more and are being paid for by people earning £100 a week or less. That is my main complaint. The Government are expecting people on relatively low earnings to subsidise the privileged dockers in a group of ports who are benefiting from these indiscriminate subsidies.

Mr. Simon Hughes: How does the hon. Gentleman reconcile that argument with the fact that in some areas there is, for the local work force, almost no other industry, unlike the position in his town, while in some areas, not least in London, the cost of living—the cost of homes and the like—is considerably greater than in some of the places about which he is speaking? If there is to be justice, it should be justice for the workers and not simply in relation to competition. That principle too should concern the hon. Gentleman.

Mr. Chope: I shall be dealing with that. If those who work in the Port of London Authority were that conscious of their privilege in having jobs there, I am surprised that they were prepared to forfeit 40,800 man days in strikes last year and 88,400 in 1983, to cite but two recent years.
The hon. Gentleman fails to take account of the reality that in the Port of London Authority is a group pf privileged registered dock workers who are taking advantage of their privileged position and have been holding the rest of the country to ransom, who are enjoying the privilege of not being able to be made compulsorily redundant, who have been withdrawing their labour and adding to the cost of the port and who expect the bill to be picked up by the taxpayers, and they are ordinary people earning much less than the dockers.
The scheme ports, other than London and Liverpool, are entitled to know when this unfair subsidy to London and Liverpool will end. The taxpayer is entitled to know what conditions the Government are putting on the new finance of £140 million under clause 2. Is it throwing more good money after bad, or is there a strategy behind it?
Most of that money, as I say, is coming from people who would enjoy being in the privileged position of the dockers in the Port of London Authority, enjoying a minimum rate of pay of £120 a week, even for doing nothing, and an average rate of pay of £190 a week for doing, relatively speaking, precious little.

Mr. Prescott: What is the hon. Gentleman's daily rate?

Mr. Chope: My right hon. Friend acknowledged on Second Reading that the taxpayers' payments
have given the PLA and the MDHC an advantage which other port undertakings have not had".—[Official Report, 23 April 1985; Vol. 77, c. 800.]
The purpose of the new clause is to blow the whistle on this unfair competition and to accept that there must come a time when it ceases to be subsidised by the general body of taxpayers.
Let us reflect on some of the facts concerning the Port of London Authority and the Mersey Docks and Harbour Company. Even with £170 million in subsidy to the Port of London Authority—that authority had a turnover in 1983 of about £74 million—it suffered trading losses in the four years to 1983 of £24·45 million.
10.30 pm
There were 1,691 registered dock workers employed in the port of London on 1 January 1985. That was substantially fewer than in 1984 and previous years. Those still employed in the port of London feel that they can strike when it suits them regardless of the consequences for their port. That is in stark contrast to the attitude in Southampton where, as a result of carefully negotiated agreements between the work force and the employers, a no-strike agreement and a two-year pay and conditions agreement have been entered into. Many dockers in Southampton have taken a pay cut to keep the port of Southampton viable. Would that the port of London dockers had accepted the same approach to deal with the financial difficulties facing that port.
Unfortunately, the attitude of those dockers, perhaps encouraged by the legislation that the Government have passed, is to assume that they have an indefinitely rosy future based upon grants and subsidies provided by the taxpayer.
If those who work in the port of London recognised that their jobs were on the line, they would not spend as much time on strike as they have during the past two years. During 1983 and 1984, in the port of London alone, 129,000 man days were lost. The revenue cost of strike action to the Port of London Authority in 1984 was apparently £1·25 million. That compares favourably with the revenue lost by the Mersey Docks and Harbour Company which suffered a similar loss of man days. That is perhaps a sign of the productivity of the different work forces.

Mr. Snape: The hon. Gentleman will concede that for various reasons some man days have been lost in Southampton. He has plainly done some work on this new clause. If he feels that London has had a greater share of the scheme than it deserves, will he compare container manning in Southampton with Tilbury?

Mr. Chope: I wish that I could give the House the details of container manning in the port of London.

Unfortunately, the questions that I have asked my hon. Friend the Minister of State about efficiency increases in the port of London have resulted in bland answers and a protestation that a detailed inquiry would be in breach of the responsibility that the port has for its own activities and in breach of commercial confidentiality.
The work force and management of the port of Southampton agreed that they would eliminate the restrictive practices which had burdened the port for a long time. They reduced the basic rate of pay by up to 25 per cent. and substantially reduced the work force. For about three months, there was no regular work load. These measures resulted in the port of Southampton being highly competitive in national and international markets and winning back business from the ports of Felixstowe and Liverpool. The port of Southampton intends winning back business from other ports as well. It is doing so on the basis of sacrifices by the individuals who work in the port to ensure that the port survives to fight another day.
The evidence that I have been given in answer to about 40 parliamentary questions during the past fortnight is that the attitude of those who work for the Port of London Authority and the Mersey Docks and Harbour Company is very different from the attitude of those who work for the port of Southampton. Those who work for the port of Southampton realise that their destiny is in their own hands, whereas those who work for the other two bodies seem to think that, regardless of what they do, the Government and the Conservative Goverment in particular, will give them a handout to meet the deficits that they cause by their irresponsible actions.
Before the intervention by the hon. Member for West Bromwich, East (Mr. Snape), I was reminding the House that, even after £170 million of subsidy, compared with an annual turnover in 1983 of £704 million, the Port of London Authority suffered trading losses of £24·45 million in the four years to 1983. That shows that the authority has not begun to become competitive and self-financing in accordance with the Government's resolve when they began to give subsidies to that port in 1980. Whenever those subsidies have been increased, my right hon. and hon. Friends have responded by saying that the subsidies were made to enable the authority to get back on its own feet and become financially viable.

Mr. Richard Hickmet: Can my hon. Friend help us with his observations on the effect of subsidies on the efficient operation of scheme ports, especially the Port of London Authority and the Mersey Docks and Harbour Company? What effect do the subsidies have on the ability of non-scheme ports to compete with scheme ports?

Mr. Chope: I cannot deal in detail with my hon. Friend's intervention. It is estimated that the national dock labour scheme adds 7·5 per cent. to the cost of each container dealt with by the port of Southampton. That is a cost that the ports of Felixstowe, London and Liverpool do not have to bear. The ports of London and Liverpool also receive additional subsidies. Scheme ports, other than London and Liverpool, are severely discriminated against. They are in the third division when it comes to fair competition.

Mr. Hickmet: In that case. if the port of Southampton and similar ports were no longer in the national dock labour scheme, what effect would that have on the viability, profitability and efficiency of those ports?

Mr. Chope: I can only speculate that on the basis of the commitment shown by the work force in Southampton and its management, and given fair competition between the ports up and down the country, Southampton would come out pretty near the top, as it has done in the first division of the Football League this season. There is the will in Southampton to succeed. Given fair competition, it will succeed. I venture to suggest that if we did not have the national dock labour scheme we would not have had the submission before the House last night from the port of Felixstowe to extend its operation. Felixstowe is benefiting from the fact that all its competitors have a millstone round their necks, otherwise known as the national dock labour scheme.
It is the burden of my argument that a port that wishes to get its own house in order, as the port of Southampton has shown clearly over the past few months, is still inhibited because of that unfair competition. The purpose of the new clause is to ensure that there is fair competition between the ports in a way that there has not been in the past.
I think that the House will agree that the position of the Port of London Authority is bad enough. However, the Ports (Financial Assistance) Act 1981 extended the regime of indiscriminate subsidy to the Mersey Docks and Harbour Company and lifted the ceiling on payments, which had originally been £70 million, to £160 million. Later, in the Transport (Finance) Act 1982, that ceiling was raised to £360 million.
What has the Mersey Docks and Harbour Company done with all the subsidy money that it has received from taxpayers? Admittedly. it has to an extent reduced its work force. It has reduced the number of registered dock workers. With the benefit of subsidy, it has also reduced the number of non-registered dock workers. However, its net trading losses in the five years between 1980 and 1984 amounted to £18·91 million. That is after subsidy of £144·4 million. I accept that £37·5 million of that sum was on account of the severance of registered dock workers, and it could be said that that subsidy was common to all the scheme ports.
However, I cannot say the same in respect of the additional £106·9 million that the Mersey Docks and Harbour Company received in respect of severance of nonregistered dock workers and on account of guaranteed loan and deficit grant. Those are enormous sums of money. One can compare them with the turnover of that company in 1983, which was £57 million. The total subsidy that has supported the unfair competition about which I complain so strongly has been excessive. It has been the equivalent of two years' turnover of the whole port.
If I could say to the House, "Well, they are trying to do their best in the Mersey Docks and Harbour Company to put their house in order," that would be some mitigation, but I have to tell the House that last year 48,200 days were lost through strike action in the port of Liverpool. That has resulted in £4 million in lost revenue and an additional £2 million in lost profits. It is clear from those figures that the docks are being subsidised indiscriminately.
The management of the Mersey Docks and Harbour Company has thought fit to increase the basic wages of dock workers in Liverpool far in excess of those enjoyed by most others, not least teachers, during the past five years. The House should not have much sympathy for that organisation. In 1984, the basic wages of dockers were raised by 7·4 per cent., the previous year they were raised by 9·1 per cent., the year before that by 10 per cent, the year before that by 14 per cent. and in 1980 they were raised by 18 per cent. Although there is still a substantial surplus of registered dock workers, they receive an average of £189 a week and overtime is available.
When do the Government expect the Mersey Docks and Harbour Company and the Port of London Authority to be able to trade profitably and without the benefit of any financial assistance from the Government and the taxpayer? I am sorry to say that, on 13 May, in answer to a written question to that effect I received the reply:
That will depend primarily on how quickly they can match their work forces to the requirements of present and future patterns of trade."—[Official Report, 13 May 1985; Vol. 79, c. 66.]
I also asked when restrictive working practices would be eliminated and received the bland answer that the details were commercially confidential. The details of the agreement made in Southampton last year to remove restrictive practices to make the port competitive were not regarded as commercially confidential. They were available to employees, shareholders and those with an interest in the port. Surely the great British taxpayer, who is keeping the ports of Liverpool and London from bankruptcy, should be entitled to more detailed answers about the progress — or lack of it — towards the elimination of restrictive working practices.
On 25 March 1981, my right hon. Friend the Secretary of State for Social Services said on Second Reading of the Ports (Financial Assistance) Bill:
At any successive stage I shall be prepared to provide assistance under the Bill only if the authorities can demonstrate substantial progress towards reducing manpower and eliminating restrictive working practices, and if I am convinced that all concerned are committed to making the changes that are needed."—[Official Report, 25 March 1981; Vol. 1, c. 993.] Although there has been substantial progress in reducing manpower, there is no evidence of similar Progress towards the elimination of restrictive working practices. I suspect that my right hon. Friend the Secretary of State and my hon. Friend the Minister are still reluctant to reveal the full facts because they might be embarrassing.
Under clause 2, the contemplated subsidy per dock worker in the port of London Authority and the Mersey Docks and Harbour Company amounts to £44,500. I base those figures on the fact that there were 1,349 registered dock workers in the Mersey Docks and Harbour Company on 1 January 1985, and 1,691 in the Port of London Authority—about 3,000 registered dock workers. Under clause 2 there will be an additional £140 million of taxpayers' money given in subsidies. That works out in excess of £46,000 per registered dock worker. If those ports cannot sort out their problems with that amount of money, they should be forced into bankruptcy.
My hon. Friend the Parliamentary Under-Secretary of State for Employment said in Committee that of the relatively modest subsidy in clause 1 a maximum of £40 million—which will go to the dock labour scherne ports in general, other than the ports of London and Liverpool — £17 million was already bespoken. That was the


extent of the overdraft facility that had already been taken advantage of. We are talking of possible additional expenditure of £23 million under clause 1. If clause 1 were balanced with clause 2, and my right hon. Friend could assure me that there would not be discrimination between the various scheme ports in giving Government subsidies, I would have no complaint. However, I am worried that the relatively modest sum available under clause 1 will be far outreached by the massive sum available to the ports of London and Liverpool under clause 2.
I hope that my right hon. Friend can tell the House that he will ensure that the £10 million, which is immediately payable under clause 1, will be paid this year to the scheme ports other than London and Liverpool, so that they receive some compensation for their suffering from the imposition of the national voluntary severance scheme.
I realise that I have detained the House at length over the matter, but it is vital. Too often hon. Members on both sides disregard sums such as £140 million as being small beer, while they agonise extensively over sums less than £40 million for higher education and the grant system. They certainly agonise extensively over sums even smaller than that, and rightly so. I am disappointed that this Bill, which proposes such massive injections of additional taxpayers' money into our ports, should have received relatively little comment from hon. Members.
Everyone realises that the national voluntary severence scheme must be supported. The Government have made considerable contributions to it. I hope that in reply to the debate on new clause 1, my right hon. Friend will be able to tell the House that there will be a limit on the extent of these new subsidies, and that there will come a time when those who work in the ports of London and Liverpool must face up to reality, as those in Southampton did last year. They will have to say to themselves, "Our jobs are on the line. If we do not agree to remove restrictive practices and become more competitive, we shall fold as our port will fold". That was the ultimatum that the port of Southampton had last year, and I am proud to say that those who work there decided that the port came before their narrow interests. They decided that, for the greater good, they would keep the port going and make sacrifices. Would that the same was the case in London and Liverpool. I hope that my right hon. Friend the Secretary of State will ensure that there is no continuation of the unfair subsidy to London and Liverpool, which inevitably must be at the expense of ports such as Southampton.

Mr. Eddie Loyden: I listened with great interest and mounting anger to the comments of the hon. Member for Southampton, Itchen (Mr. Chope), who obviously does not understand the history of the ports or the position in which the dock labour scheme ports have been placed. It is not a matter of competition, but of how the ports of the south-east and south-west coasts of Britain have taken over the role that was previously played by the major ports of London and Liverpool. They used to be the two largest ports in the United Kingdom, dealing with massive imports and exports of materials that we no longer see in our docks. The port of Liverpool employed about 15,000 registered workers after the decasualisation of the docks industry, which, it would appear, the hon. Member for Itchen wishes to be revived. He also favours the

withdrawal of the right of dockers to strike, because he seems to believe that there should never be a reason for dockers resorting to strike action—

Mr. Snape: As in Southampton.

Mr. Loyden: Yes — although Liverpool benefited from that strike, for a change.
The Bill's purpose is to wind down further the number of registered dock workers employed by the Mersey Docks and Harbour Company. The number of ancillary workers at the port has fallen to almost nil. That has had a dramatic effect not only on Liverpool, but on large areas of the north-west far beyond Merseyside. The hon. Gentleman should recognise that in places such as Liverpool, where unemployment is 21 per cent., there is bound to be resistance to the sort of dramatic change that has taken place in the port transport industry, with a reduction in registered dock workers from nearly 15,000 to fewer than 2,000. In the 1960s, about 18 dredgers operated in the port of Liverpool, and there was a total dredging fleet of more than 40 ships. Now there are only three, because of the closure of most of the docks at the south and north ends of the city.
The effect of the change on employment and the port-related industries is dramatic. It amazes me that there is no trace of sympathy from Conservative Members for the devastation caused by the decline of the port, which happened because of the political decision of a Tory Government to enter the Common Market. That ended the possibility of those ports continuing to flourish as they had for the whole of the century.
The speech of the hon. Member for Itchen showed the unacceptable face of Toryism towards the areas that have been devastated by the policies that he and his Government have followed. There is not a shred of sympathy for the many unemployed or for a port which was once flourishing but which is now employing, in comparable terms, only a handful of men. He recognised that one of the main purposes of the Government's port policy is to kill off the national dock labour scheme, which, in 1946, ended the inhumane way that dock workers were treated. Thousands of men used to parade on the docks to be taken on by the employers on whim. That is the sort of indignity that the Tories offer to working people, and that is what we expect from this new brand of Tory MPs.
11 pm
There will be no welcome for the Bill from the port of Liverpool, the registered dock workers and ancillary workers, or the people of Merseyside. It will hasten the further downward spiral of the port by reducing the labour force. The hon. Member for Itchen did not mention the savings that had been made by the massive reduction in the payroll of both the port of London and the port of Liverpool, although he spoke at length about subsidy. Anyone who has examined these things knows that the recovery of that subsidy was amazingly quick once the payroll was reduced. It is a scandal and a shame that there has been no understanding or sympathy for the plight of these two great ports, but I should not expect that from this new brand of Tory.
I hope that the Secretary of State will ensure that the problems facing London and Liverpool will be met as they should be. They are not the responsibility of the ports but result from the dramatic changes that have taken place, not only technologically but in the location of our trading


ports, and they have led to the deterioration and downfall of our ports. There should be constant Government sympathy and understanding of the position. They could show that by ensuring that the Mersey Docks and Harbour Company and the port of London are not left with a burden that is not of their making, but has been acquired to sustain those ports. and to give employment opportunities, and the services provided by both ports.

Mr. James Couchman: I am much in sympathy with the thrust of the new clause. I would prefer it if the House were discussing the abolition of the National Dock Labour Board scheme, but that was not to be, at any rate not for this year. The scheme is a major distorting factor in the ports and docks industry, in which there is plenty of capacity and competition is keen between scheme port and scheme port, and scheme port and non-scheme port.
My interest in this matter arises out of the fact that in my constituency I have the most recently constituted dock in the country. On 1 January 1984, the Medway Ports authority moved into the royal naval base at Chatham, set up a subsiduary company, the Medway Chatham Dock Company, and started a commercial dock operation. The MPA already operated a highly successful deep-water dock at Sheerness.
Much that I have to say about Chatham applies equally to Sheerness, although the latter is situated just outside my constituency, and in that of my hon. Friend the Member for Faversham (Mr. Moate). Both Sheerness and Chatham are scheme ports, and are successful to boot. The new Chatham docks has started with all the disadvantages of an old-style enclosed dock, just like the London docks, the royal docks, the Surrey docks and all the old-fashioned ports. Ships have to be locked in and out and they are dependent on tidal estuarial water. Despite that, in its first year of operation, the Chatham docks showed a profit. It handled over 400,000 tonnes out of 336 vessels, and used all of its eight berths in the great number 3 basin of the former Royal Navy dockyard.
In 1985 that tonnage is expected to rise to more than 1 million tonnes. By 1988 it should reach 2·5 million tonnes. The tenants of the Medway Chatham Dock Company expect to invest £5 million in new facilities at Chatham during 1985. That is not a bad record, when one considers that in 1984 there was an irrelevant and damaging attempt to involve dock workers in the coal strike. Jobs have been created in an area of high unemployment and deindustrialisation. There may be gloomy predictions from many of Britain's ports, but the considerable success of Chatham shows that Medway is an exception. Its success is already putting a strain on the infrastructure.
One may ask why the Medway scheme ports are doing so well. Where is their business coming from? Chatham, which is well placed for the motorway network, is probably taking trade away from the east coast ports, but there is little doubt that the growth of Sheerness has been at the expense of port of London facilities, particularly at Tilbury. Why has that happened? The most telling single factor is the difference in the attitude of the work force. The men on the Medway are paid a good day's pay for a good day's work, whereas I suspect that my hon. Friend the Member for Southampton, Itchen (Mr. Chope) would say that PLA men are paid a fair day's pay for an hour's work.

Mr. Prescott: Look at the daily rates that they get.

Mr. Couchman: The contrast in attitudes towards the 1984 strikes between the Medway men, who rapidly cleared the backlog of cargo that accumulated during the first strike and who did not go on strike at all when the second strike was called, and the PLA men in Liverpool, to whom strike action is a knee-jerk reaction. is stark indeed.
The men in the ports of London and Liverpool bear much of the blame for their lack of competitiveness and success and for the need for this House to consider raising the ceiling for financial assistance from £360 million to £500 million, which my right hon. Friend the Secretary of State for Transport may give to the PLA and to the Mersey Docks and Harbour Company by means of grants, loans and guarantees. The Bill stipulates that that assistance should be devoted to reducing manpower in the ports and, to quote from the explanatory and financial memorardum, to
supporting them while such measures are being taken.
It is the latter vague description and definition which worries the movers of the new clause, for there is a heavy suspicion that Liverpool and London are offering discounts to offset their mediocre industrial ielations, discounts which will be paid for by means of the financial assistance that they are to receive. That creates unfair distortion of the whole market and serves to put the successful scheme ports of the Medway at a grave disadvantage. The Bill both accentuates and perpetuates that unfairness.
There is another unfairness. Because the Medway ports are successful and are recruiting labour, they are paying heavily into the National Dock Labour Board levy, whereas the unsuccessful docks which are shedding labour are receiving money from the levy. The make-up of the board of 50 per cent. employers and 50 per cent. representatives of the work force controlling dicipline, employment protection and, above all, recruitment means that competition from the successful scheme ports can be stifled by the competitors of those ports and by trade unions whose interests may be very different. The scheme must mitigate against the successful scheme port in several ways and it distorts the whole market. It should have been scrapped when decasualisation took place in 1967. It should be scrapped now and the money involved in implementing the provisions of the Bill should be used to that end.
To continue to pour money into unsuccessful ports, propped up by such a distorting agency as the dock labour scheme, is as wasteful and as sterile as pouring money into unviable coal mines, unused railway lines and unwanted steel capacity. The money would be better invested—[Interruption.] It would do Opposition Members well to listen instead of chiacking from a sedentary position. The money would be better invested in making even more attractive the successful ports, such as those on the Medway. My right hon. Friend the Secretary of State could make a start by providing within his roads budget a much needed new access across the Medway to the new docks scheme so that the projected 1,100 heavy lorries a day which will thunder through Gillingham and Chatham do not make the life of my constituents hell. That would be a good way of spending the £40 million included in the Bill and proposed to be used for propping up London and Liverpool docks.
I have a great deal of sympathy with the clause, and I hope that my right hon. Friend the Secretary of State will accept it.

Mr. Snape: At the outset of the debate, I thought that we would have a nice, quiet and pleasant evening. One imagined that the Secretary of State would creep into the Chamber wearing his carpet slippers and throw a bucket of public money at the latest problem that he and his Department have managed to create by their incom-petence. The debate has been much livelier than we expected.
My hon. Friend the Member for Liverpool, Garston (Mr. Loyden), who rightly pointed out that industrial relations problems are not peculiar to Liverpool, did so with particular effect on the comparison between Liverpool and Southampton. It is not customary for Opposition Members to exacerbate the effects of industrial disputes anywhere in the country. Until comparatively recently, somewhat regrettably, the port of Southampton appeared from time to time in the long list of industrial disputes in the country. Indeed, until quite recently it was said by various Fleet street newspapers—we understand that they are not renowned for their accuracy in dealing with industrial relations — that the activities of a minority of dockers in Southampton were leading to the transfer of traffic out of the country, and that our competitors in the EEC were benefiting as a direct result.
According to the hon. Member for Southampton, Itchen (Mr. Chope), who somewhat tenuously represents one of Southampton's constituencies, all these problems are behind us. The Opposition, of course, welcome that. We are delighted that industrial relations in Southampton have shown this much-needed improvement.
If ever the time of Parliament was wasted, it was for 40 minutes or so tonight with the hollow sound of whatever sort of grapeshot one could call it that came from the hon. Member for Itchen — perhaps Bordeaux grapeshot would be a good description— because the hon. Gentleman has no serious intention of asking his right hon. Friend the Secretary of State to accept the clause. If the Secretary of State declines to accept it, as I fairly confidently predict he will, I hazard a guess that the hon. Member for Itchen, for all the chest beating and tub thumping that we have listened to tonight, would not dare vote for it. The port and the constituents that he represents have directly benefited from the scheme about which he complained so bitterly tonight.

Mr. Chope: rose —

Mr. Snape: I will give way in a moment or two. The hon. Gentleman will find it helpful if he allows me to finish giving him the verbal box round the ears before he starts to retaliate; otherwise we might well be here for considerably longer than we should.
Listening to the hon. Gentleman, one would have thought that the only two ports that had benefited from the scheme were London and Liverpool. We heard a great deal from him about the working practices and the comparatively high salaries, so he said, that the dockers earned at Tilbury. The figure of £125 was one that—

Mr. Chope: For doing nothing.

Mr. Snape: I always like to listen to banisters talking about the salaries of other people. I have no doubt that

£125 a week would not interest most of the banisters in the hon. Gentleman's chambers. I hazard a guess, looking at the hon. Gentleman's dad's occupation. that it would not keep his dad in lunches for too many wet Wednesdays.
11.15 pm
When the hon. Gentleman talks about dockers and their wages, he should be a little less offensive. I hazard a guess that all the empty threats that we have heard this evening will not be followed by action—indeed, they could not be, because the hon. Gentleman knows full well that there have been redundancies in Southampton that were directly funded by the very scheme that he affects to despise and which he implies he will vote against if he pushes new clause 1 to a vote.
I cannot understand why the hon. Member for Glanford and Scunthorpe (Mr. Hickmet) has disappeared. If any hon. Member who has put his name to the new clause has a legitimate grouse, it is he. Unlike the warlike hon. Member for Itchen, the hon. Member for Glanford and Scunthorpe has in his constituency the scheme port of Immingham, which has not so far benefited from the redundancy payments payable under the scheme. Perhaps that is why he made a quick intervention, to prove to his local newspapers that he was here for a minute or two, and the scuttled from the Chamber. There is a legitimate gulf between the two hon. Members. The hon. Member for lichen represents a port that has benefited from the scheme, while the hon. Member for Glanford and Scunthorpe does not.

Mr. Chope: What proportion of the £360 million so far voted under the Ports (Financial Assistance) Act 1980 has been to the benefit of Southampton, and how much of the remaining £140 million proposed in the Bill will be to its benefit?

Mr. Snape: Again, we have the problem with Conservative Members who are all in favour of capitalism —but not too much of it in their constituencies—and against subsidies, except when the subsidies to their constituencies are smaller than those to other parts of the country.
It has nothing to do with the productivity record of Southampton that it has benefited less than the port of Liverpool. As my hon. Friend the Member for Garston accurately said, the fact that Britain joined the EEC benefited Southampton at a stroke, and provided an enormous disbenefit to Liverpool. I do not think that even the hon. Gentleman, in his desire to blow his constituency trumpet, can deny that that geographical accident —Southampton being nearer than Liverpool to the other countries in the EEC—will inevitably benefit that port and tell against Liverpool.

Mr. Chope: rose —

Mr. Snape: I shall give way in a moment. The hon. Gentleman had 40 minutes huffing and puffing—[Horn. MEMBERS: "Forty one."] so he had 41 minutes huffing and puffing, and if he is ever to blow down this House, he will need more ammunition than he has produced so far. I am a patient man and I am prepared to give way to him again.

Mr. Chope: I am grateful to the hon. Gentleman. I do not know whether he saw a national newspaper earlier this week which had the headline:
Pay-cut port sets hourly record in container trade".
It stated:


The Port of Southampton, where dockers have accepted pay cuts and lower manning levels to try to win more business, set a record last week for the number of containers handled.
To what extent have the ports of London and Liverpool sought to help themselves in the same way as Southampton?

Mr. Snape: Again, the benefits received by the port of Southampton are a direct result of this scheme about which the hon. Gentleman seeks to complain. They have been paid for directly through this scheme.

Mr. Chope: Rubbish.

Mr. Snape: It is not rubbish at all; it is fact. If the Secretary of State has brought the right brief, he will tell the hon. Member for Itchen that. The benefits which Southampton has enjoyed have been funded directly by the scheme which he seeks to complain about and to vote against, although we doubt whether the donning of war paint and the brandishing of spears will lead to much when the Division bells ring. We shall do our best to provide the hon. Gentleman with the opportunity of proving to his constituents that he is serious, that the chest beating that he has indulged in tonight meant something and that he seeks to prevent the port of Southampton from receiving any more benefits from this scheme which, in the terms of the new clause that he has moved, is designed
so as not to alter the relative competitive position of any employer of registered dock workers.
That comes from an hon. Member who has seen the competitive position of the dock workers in his constituency boosted by the scheme. For him to indulge in 41 minutes of empty rhetoric about the working practices of Tilbury and Liverpool is an abuse of your tolerance, Mr. Deputy Speaker, and, as we shall see in due course, is likely to be regarded by the rest of us as an abuse of the procedures of the House.
The hon. Member for Gillingham (Mr. Couchman) read his notes very well. He referred to the miners' strike. One can always tell when the Conservative party is getting desperate because it delves into history, whether a long way back or a short time ago. According to Conservative Members, the miners' strike was a good investment. They do not seem to be too eager to remind us of those days now, but, to give him his due, the hon. Member for Gillingham did so. He, too, was against any sort of subsidy. He implied that there could be no subsidy for outdated industries and under-used railway lines.
In the next breath he demanded extra roads to be paid for by the taxpayer to take the extra heavy lorries that he did not want thundering through his constituency. Where does he think the money will come from to pay for new roads? Is it to be plucked out of the air? The Secretary of State does not have much credibility these days, let alone any money. The money for roads comes out of general taxation or the taxation of private motorists. Certainly it does not come out of the budget for the road haulage iudustry or, fortunately for the hon. Member for Gillingham, from the ratepayers in his constituency.
Again the hon. Gentleman is fortunate, because the port to which he referred has not so far had to apply for benefits under the scheme. Is he sure that that will continue to be the case? He must not fall for the sort of empty rhetoric that was used by the hon. Member for Itchen. After all, his hon. Friend is a barrister; he is used to blowing hot and cold with empty rhetoric, and charging a pretty penny for the use of it too. The hon. Member for Gillingham has had

a much more varied career and he must not indulge in that sort of thing. He cannot guarantee that in the future the Medway ports will not need to apply for benefits under the scheme.
The Secretary of State is determined never to have any sort of national ports policy. He believes in the philosophy of the market place. We are eagerly awaiting his honeyed words. As I said, he will no doubt chuck another bucket of public money at yet another disaster. Nominally he believes in the freedom of the market place and he is not in favour of a national ports policy. In a moment or two he will tell the House why he cannot accept the new clause so ably if not too briefly moved by his hon. Friend the Member for Itchen.
I confess to some relish about tonight. I have not had the privilege of listening to the Secretary of State for some weeks, and when he appears before us to advocate a little Socialism, I should be the last to complain. He will tonight advocate the spending of more public money to con-ect a series of mistakes made over the years by the Department of Transport and to contradict some of the fine Right-wing phrases used by some of his predecessors.
In view of that, I urge the right hon. Gentleman to accept the new clause and show us what a good capitalist he really is. I cannot say that the hon. Member for Itchen is a good capitalist, because his port has had its nose in the trough for some time. Although the right hon. Gentleman will not want too many noses being put in the enormous trough that he will fill tonight, I hope he will demonstrate that at heart he is still an old-fashioned Treasury Minister, and accept the new clause. By so doing, he will demonstrate that, no matter what sneers come from Opposition Members or what unkind comments come from his hon. Friends, he remains a lovable and unrestrained capitalist of whom the Prime Minister approves so much that she keeps him in her Cabinet despite all the newspaper prophecies about his future and despite the more than a dash of Socialism that he will offer the House tonight.

The Secretary of State for Transport (Mr. Nicholas Ridley): What a pathetic speech the hon. Member for West Bromwich, East (Mr. Snape) made. He has never made a constructive remark about anything. Indeed, if he had an entry in "Who's Who", he would list under hobbies only one—there might be others, but I had better not go into those now—and that would be "fishing in troubled waters." That is all he has ever tried to do. I assure him that tonight the waters are not as troubled as he thinks. His bait is easy to see, with a great hook sticking through it, and I advise my hon. Friends to pay no attention to that part of the debate that has been totally and utterly wasted by him.
The debate has otherwise ranged wide. The hon. Member for Liverpool, Garston (Mr. Loyden) said that Liverpool had declined because we joined the Common Market. Why, then, did London decline, as it too is on the east coast, as is Felixstowe? The hon. Gentleman stretches that point too far and fails to notice the enormous technological revolution that has taken place in the docks, with containerisation, roll on roll off and oil and bulk cargo moving by pipeline, all of which has been the cause of the massive decline in dock labour in this country.
I agree with the hon. Member for Garston that nowhere has that decline been more massive than in London and Liverpool. He quoted some figures. In 1960, there were


14,823 registered dock workers in Liverpool. Now there are 1,925. In London the drop has been even bigger, from 28,401 in 1960 to 2,744 now. On many occasions the House has felt that problems on that massive scale, with an industry which is not profitable, has required the intervention of the taxpayer to assist in managing the decline.
This is not the occasion, and it certainly would not be right for me, to go into comparisons between Liverpool, London and Southampton or even Chatham and Sheerness, to which my hon. Friend the Member for Gillingham (Mr. Couchman) referred. It would be quite wrong to go into which had the best strike record or productivity record or which, as it were, deserved rewards or penalties from the taxpayer. That is not the way to look at the matter. I acknowledge that my hon Friend's ports are now beginning to prosper and I hope that many others which have suffered serious decline will go in the same direction.
11.30 pm
I believe that the basis on which the Government have assisted the industry is the only correct one. It is not based on strike records, efficiency, productivity or anything of that kind. It is based on the need to assist people who have to leave the industry because there is no longer any work for them. Assisting those albeit voluntary redundancies has been the purpose for which the vast bulk of the money has been used in the past. In a sense, there is no competitive advantage in it for one dock or another. That which suffers the biggest drop in its labour force will receive the largest amount of severance grant, but I am not sure that that is really relevant to the efficiency aspect.
There are three ways in which the Government can assist ports, under the 1981 Act and under the Bill if it becomes law. I should like to describe them, as I believe that this will help to allay the fears of my hon. Friend the Member for Southampton, Itchen (Mr. Chope) that there is discrimination and that too much money will go to London and Liverpool at the expense of other scheme ports.
First, there is the money paid for the severance of registered dock workers. I believe that the figures given by my hon. Friend were correct. but that money does not go to the benefit of London and Liverpool particularly. It is paid to the National Dock Labour Board, which then compensates those dock workers whose jobs are to be voluntary severed, whatever their port of origin. Under the dock labour scheme both London and Liverpool pay the levy towards the severance fund. The benefit of the money paid for the severance of registered dock workers goes to the industry as a whole. The amount paid under clause 2 is determined by the number severed in London and Liverpool. That is the trigger determining the number of severances to be paid, but it is not and never has been an advantage for London or Liverpool. Recognising that the way in which this is funded should be broadened, however, clause 1 enables the Government to pay money direct to the National Dock Labour Board, which will be of equal benefit with the clause 2 money for the severance of registered dock workers.
Secondly, the money has been used in the past to pay for severance payments to non-registered dock workers in London and Liverpool. In this context, my hon. Friend the

Member for Itchen is absolutely right to say that that is an advantage which goes to those two ports and not to other scheme ports. That is why I announced on Second Reading the Government's intention to phase out the payment of severance money for non-registered dock workers in London and Liverpool in two or three stages over two or three years. We have not yet settled the details precisely but that will bring this form—it is not discrimination—of favourable treatment, compared with other ports, to an end.

Mr. Prescott: Is it not discrimination?

Mr. Ridley: The hon. Gentleman has the better of me in forming the term of words.
The third way in which London and Liverpool have been assisted is through grants, loans and guarantees for their economic performance. My predecessor, my right hon. Friend the Member for Guildford (Mr. Howell), told the House in December 1982 that he would continue to meet the cost of severances by the Port of London Authority and the Mersey Docks and Harbour Company and to make loan finance available for justified projects until he judged that the authorities could make their own arrangements to cover those items. He said that he would guarantee overdrafts to cover normal trading fluctuations.
I am as anxious as anyone to bring to an end the special assistance that the PLA and the MDHC receive and which other ports do not, but that must be done in a realistic way. To end it now, completely, would place a greater burden on both authorities than they could reasonably be expected to bear. That is why I intend to phase out the assistance that we have been giving in the form of guarantees and loans, and more especially grants, for the cost of severing non-registered dock workers. We have already reduced the overdraft guarantee for the MDHC from £5 million to £1 million. My predecessor said that we would not resort again to deficit financing for London and Liverpool and that I reaffirm we shall not do.
I share the objective of my predecessor of working towards a position of no favouritism. I agree that some ports have been in a third group, as it were, and have had the least help, including Southampton. That is why we, my hon. Friend and I have both suggested a way of moving such Government finance as will be needed towards the scheme ports as a whole under clause 1. Secondly, we have announced the phasing out of the payment of severance grant to non-registered dock workers at London and Liverpool. Thirdly, we shall tighten the financial regime on London and Liverpool so that as soon as it is ever possible for them to do so they will stand on their own feet without Government support.
Given the size of the decline in the work forces in the ports of London and Liverpool, there would be no possibility of anything but total collapse if the form of assistance that the Bill provides had not been extended to the ports. We are near the stage when special assistance can be brought to an end. The two ports are nearing the point where labour requirements are not far below the labour that they still have on their books.
I was shocked to hear the hon. Member for Garston say that within the Government there is no sympathy for the plight of the ports. As my hon. Friend the Member for Itchen said, there is £180 million-worth of sympathy in the Bill. The hon. Gentleman took an extreme and unjustified position.
I hope that my hon. Friend the Member for Itchen will accept that I have announced active measures to end discrimination. There has been an enormous reduction in the number of registered dock workers due to the impact of technological change. We are close to obtaining our goal of even-handed and non-discriminatory competition. We intend to use the Bill to reach that stage as soon as possible. I hope that my hon. Friend will not feel like pressing the clause to a Division.

Mr. Chope: Although my right hon. Friend the Secretary of State has not given a specific date by which the special assistance will be brought to an end, I hope that the House will accept what he has said in the spirit in which he said it. I hope also that his remarks will be borne out by results. I am grateful to my right hon. Friend for going as far as he has, which I think is further than hitherto. I beg to ask leave to withdraw the motion.

Hon. Members: No.

Question put, That the clause be read a Second time:—

The House divided: Ayes nil, Noes 80.

Division No. 207]
[11.39 pm


AYES


Nil


Tellers for the Ayes:



Mr. Eddie Loyden and Mr. Simon Hughes.



Mr. Simon Hughes

NOES


Amess, David
Lennox-Boyd, Hon Mark


Ashdown, Paddy
Lester, Jim


Baker, Nicholas (N Dorset)
Lilley, Peter


Beaumont-Dark, Anthony
Lord, Michael


Best, Keith
Luce, Richard


Boscawen, Hon Robert
Maclean, David John


Bottomley, Peter
Major, John


Bowden, A. (Brighton K'to'n)
Mather, Carol


Bright, Graham
Maxwell-Hyslop, Robin


Brinton, Tim
Mitchell, David (NW Hants)


Burt, Alistair
Neale, Gerrard


Butterfill, John
Neubert, Michael


Cash, William
Nicholls, Patrick


Clarke, Rt Hon K, (Rushcliffe)
Penhaligon, David


Colvin, Michael
Powell, William (Corby)


Coombs, Simon
Ridley, Rt Hon Nicholas


Cope, John
Roe, Mrs Marion


Couchman, James
Rowe, Andrew


Currie, Mrs Edwina
Rumbold, Mrs Angela


Dover, Den
Sackville, Hon Thomas


Durant, Tony
Sainsbury, Hon Timothy


Eggar, Tim
Shepherd, Colin (Hereford)


Fenner, Mrs Peggy
Smith, Tim (Beaconsfield)


Forsyth, Michael (Stirling)
Spencer, Derek


Forth, Eric
Spicer, Michael (S Worcs)


Franks, Cecil
Stern, Michael


Freeman, Roger
Stevens, Martin (Fulham)


Garel-Jones, Tristan
Stewart, Allan (Eastwood)


Gower, Sir Raymond
Thompson, Donald (Calder V)


Gregory, Conal
Thompson, Patrick (N'ich N)


Ground, Patrick
Thurnham, Peter


Hamilton, Neil (Tatton)
Trippier, David


Hargreaves, Kenneth
Viggers, Peter


Harris, David
Wardle, C. (Bexhill)


Howarth, Alan (Stratf'd-on-A)
Watson, John


Hunter, Andrew
Watts, John


Jackson, Robert
Wood, Timothy


Jones, Gwilym (Cardiff N)
Yeo, Tim


King, Roger (B'ham N'field)



Kirkwood, Archy
Tellers for the Noes:


Knowles, Michael
Mr. Archie Hamilton and


Lang, Ian
Mr. Peter Lloyd.

Question accordingly negatived.

Mr. Snape: On a point of order, Mr. Deputy Speaker. Is it not unprecedented for an hon. Member to detain the House as long as did the hon. Member for Southampton, Itchen (Mr. Chope) without finding the courage to vote — [HON. MEMBERS: "Bogus."] Conservative Members do not know yet what I am about to say. The hon. Gentleman did not find the courage to vote for his new clause. Indeed, he did not find the courage even to call a Division. Bearing in mind the seriousness of the new clause that we have just been discussing and the fact that the hon. Member for Itchen took no less than 41 minutes to explain the reasons behind his tabling of the new clause, surely it must be discourteous, if not unprecedented in the House, for the hon. Gentleman then to seek to withdraw the motion, although the explanation that he received from the Secretary of State was manifestly unsatisfactory.
I have no intention of detaining the House for a moment longer than is necessary, but it is for you, Mr. Deputy Speaker, as an old campaigner, to guide the hon. Gentleman on his duty in the House, particularly in regard to the contents of the Bill, which are vital to thousands of people who work in ports throughout the country. I hope that you will consider, if not formally reprimanding the hon. Gentleman from the Chair, at least guiding him on the moving of new clauses and their impact on legislation as important as this Bill.

Mr. Deputy Speaker (Mr. Ernest Armstrong): I do not know about precedents, but I know that what the hon. Member for Southampton, Itchen (Mr. Chope) did was not out of order. It is not unknown for amendments and new clauses to be moved and for the mover to be persuaded by the argument. However, it is not for me to decide why the action was taken. It is for me only to say that it was perfectly in order.

Mr. Snape: Further to that point of order, Mr. Deputy Speaker — [Interruption.] I should have thought that even at this comparatively late hour the House would be interested to learn the views of at least some of us who were concerned enough about the legislation to remain here until this time of night. I object to verbal abuse from Conservative Members who have been conspicuous by their absence from the debate so far, yet on the bidding of the Whip, the hon. Member for Watford (Mr. Garet-Jones), come into the Chamber to seek to barrack Opposition Members who wish to make a constructive point.
In reply to the point of order that I raised. Mr. Deputy Speaker, you said that it was not unprecedented for an hon. Member who has moved a new clause, albeit at some length—and I notice that you did not comment on the time that it took the hon. Member for Itchen to move his new clause — to be persuaded by the argument. An inordinate time was taken in moving that new clause, and the explanation to which you referred, Mr. Deputy Speaker, was specious to say the least. The House is worthy of better consideration than that which it has received from the Secretary of State and the hon. Member for Itchen.
In conclusion, I ask that if the hon. Member for Itchen pursues the amendments, which deal with fairly substantial matters in the Bill, they should be moved with a little more diligence and brevity than the new clause on which he recently failed to vote.

Mr. Deputy Speaker: I had intended to inform the House that I allowed a fairly wide debate on the new clause —clauses 1 and 2 were referred to often—so the debate on the amendments will be much narrower.

Mr. Snape: On a point of order, Mr. Deputy Speaker. Might I ask you to look at the names of the hon. Members in whose names amendment No. 1 has been tabled? You will see that the name of my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) appears.

Mr. Keith Best: Cynon Valley?

Mr. Snape: To an Englishman, one valley is pretty much like another. It is bizarre even by the standards of the House of Commons for us to be taught Welsh by a resident of Brighton at midnight. My point of order is that I believe that my hon. Friend's name appears in error, and I should like your guidance on how to remove it before the amendment is debated as I know she would not want to be associated with it. I hope that when the hon. Member for Itchen moves the amendment he will make that plain.

Mr. David Harris (St. Ives): Further to the point of order, Mr. Deputy Speaker. I have noticed the protest of the hon. Member for West Bromwich, East (Mr. Snape), but he has failed to inform us that there are no Back Benchers behind him—

Mr. Deputy Speaker: Order. That was not further to a point of order about signatures to the amendment.

Mr. Harris: With the greatest respect, Mr. Deputy Speaker, the hon. Member for West Bromwich, East said that the hon. Member for Cynon Valley (Mrs. Clwyd) wished to be dissociated from the amendment, but she is not here. No Opposition Back Benchers—rs—

Mr. Deputy Speaker: Order. The hon. Gentleman knows that that is not a matter for me. I think that we can now consider the amendments.

Clause 1

GRANTS TO NATIONAL DOCK LABOUR BOARD

Mr. Deputy Speaker: We now come to amendment No. 1 with which it will be convenient to take the following amendments:
No. 4, in page 2, line 9, leave out clause 2.
No. 5, in clause 2, page 2, line 13, leave out '£500 million' and insert '£400 million'.

Mr. Chope: I regret that the hon. Member for West Bromwich, East (Mr. Snape) should have trivialised the important issues that affect the ports industry by rather flippant remarks dressed up as points of order. We had a useful debate on subsidy on new clause 1. I thought that my right hon. Friend's reply met what I said and showed that the Government will not allow unfair discrimination and the subsidy to the ports of London and Liverpool to continue indefinitely. That is good news for Southampton and other scheme ports. I am sorry that some of my right hon. and hon. Friends have been inconvenienced by being put through a Division called by Opposition Members when I had made it clear that, in the light of what my right hon. Friend the Secretary of State had said, I wished to withdraw the new clause.
This group of amendments flow from the new clause. Because of what my right hon. Friend said, I beg to ask leave to withdraw the amendments.

Mr. Deputy Speaker: There is no question of withdrawing the amendments.

Mr. Snape: I rise to speak to the amendments. [Interruption.]. It is normal custom and practice for one hon. Member to speak at a time, except late at night when one or two Conservative Members have had rather a good dinner.
The amendments involve a large element of unfair discrimination and subsidy. The hon. Member for Southampton, Itchen (Mr. Chope) has used that phrase himself. From the wording of the amendments—

12 midnight

Mr. Deputy Speaker: Order. The hon. Member for West Bromwich, East (Mr. Snape) must not speak to amendments which are not before the House. He can move the amendment.

Mr. Snape: I had not realised that the hon. Member for Itchen had not moved the amendment. What he said for 41 minutes bore no resemblance to what he did when the new clause standing in his name was put before the House. If the hon. Gentleman has not yet moved the amendments, for the purpose of discussing the amendments, I beg to move amendment No. 1, in page 1, line 8, at end insert
'other than those registered with the Port of London Authority and the Mersey Docks and Harbour Company'.
May I ask you, Mr. Deputy Speaker, whether it is in order to debate amendment No. 2 with amendment No. 1, or whether you wish me to debate them separately?

Mr. Deputy Speaker: Amendments Nos. 2 and 3 are out of order. The hon. Gentleman or another hon. Gentleman can move amendment No. 1, and amendments Nos. 4 and 5 may be discussed with it.

Mr. Snape: I am appalled that the hon. Member for Itchen tabled amendments Nos. 2 and 3 which have been ruled out of order. Given his pretended expertise, I should have thought that he would have taken proper advice before tabling them. When the amendments are put to the vote, I reserve the right to demand a separate vote on amendments Nos. 4 and 5, although we may debate all three amendments together.
I denounce the appalling discrimination behind the amendments, which the hon. Gentleman did not have the courage to move. We heard a wholly unjustified tirade against the employees of the ports of London and Liverpool. Prejudice against those employees lies directly behind the tabling of the amendments. I move amendment No. 1 merely to discuss it.
The amendments seek to exclude from the nationally agreed scheme the employees of the Port of London Authority and the Mersey Docks and Harbour Company. In an earlier speech, the hon. Gentleman left the House in no doubt about his feelings about the employees of those two ports. Indeed, he was most outspoken about what he saw as their appalling strike record. He spoke of what he termed their appallingly low productivity, and sought to compare what he termed as inefficient and incompetent employees of those ports with the super-efficient employees of the port of Southampton.
Given the opinion polls and the results of the county council elections, I well understand that a Conservative majority of about 5,000 does not allow one to rest easy in one's bed, and that the hon. Gentleman would have to portray himself to his electorate as a great defender of their


interests and a proud advocate of the working practices in the port of Southampton. However, that is no excuse for his earlier attack on the employees of Liverpool and London, nor for the tabling of the amendment, which seeks to perpetuate those wholly unproven and unjustified allegations. Again I refer to the hon. Member who used to represent Anglesey. As an Englishman I would not even attempt to pronounce his present constituency. He assured me that the hon. Member for lichen spoke for no less than 41 minutes. I hope that, now that I have moved the amendment on his behalf, the hon. Gentleman will attempt to justify the allegations that he made. Without repeating any of my earlier points about the fortunate geographical location of the port of Southampton compared with the other two ports, I must say that such attacks are completely unjustified.
Indeed, given the complexity of the scheme, it is completely unnecessary for the hon. Gentleman to make such an attack, because the winding up of the Mersey Docks and Harbour Company and its exclusion from the scheme is nothing new. As long ago as 1970, in the brave new world of Selsdon man, the right hon. Member for Old Bexley and Sidcup (Mr. Heath), who was then Prime Minister, decided that the Mersey Docks and Harbour Board was bankrupt and, therefore, should go to the wall sooner rather than later. Common sense prevailed, and even the Government of the right hon. Member for Old Bexley and Sidcup, in their fairly Right-wing days—the Secretary of State for Transport was a fairly junior member of it—saw the folly of what they were trying to do and introduced legislation to bail out the port of Liverpool.
The fact that we are debating a similar matter tonight shows that the brave Right-wing rhetoric of the Conservative party soon melts away when it is faced with electoral reality. We saw that phenomenon in the speech of the hon. Member for lichen on new clause 1. In 1972, the House was asked for the first time, but certainly not for the last, to vote considerable sums of money in loans and grants for the preservation of jobs and the infrastructure of the port of Liverpool. The Bill is not unusual; indeed, a similar Bill was debated only about two years ago.
To try to exclude those ports from the benefits of the scheme is blatantly unfair. The Secretary of State—

Mr. Chope: Will the hon. Gentleman give way?

Mr. Snape: No, not yet. The hon. Gentleman has been put up to intervening by the Secretary of State's parliamentary private secretary.

Mr. Chope: Not at all.

Mr. Snape: I am not giving way, so the hon. Gentleman had better sit down or he will be ruled out of order. If he wishes to speak to the amendments that stand in his name, he should have had the guts to get to his feet and do so at the appropriate time. He could have done so when you, Mr. Deputy Speaker, called the amendments immediately after the Division—a Division in which he did not have the guts to vote—and I have no intention of giving way to him.

Mr. Chope: Will the hon. Gentleman give way? He has cast aspersions on my character.

Mr. Snape: I have no intention of giving way to the hon. Gentleman. I could not possibly cast aspersions on his character, because I would not know him if he walked

into the Chamber, or even walked out of the Chamber, as he is doing now. The aspersions that the hon. Gentleman cast on the employees of those two ports were little short of deplorable.
For once, the Secretary of State and I are at one, because we both wish to guarantee the future of those two ports. He and I are. in our respective ways, anxious to ensure that the ports of Liverpool and London prosper, although it is an expensive business to guarantee, if not their prosperity, their continuation. The provisions of the scheme could extend far beyond the two ports that the amendment seeks to exclude.
As I said earlier, it is largely a matter of luck rather than judgment, of geographical location rather than productivity and of fortune rather than working practices that has brought some prosperity, not without much anguish, particularly in Southampton. It is clear that ill fortune has frowned on the ports of London and Liverpool. I hope that, in the more measured atmosphere that we now find ourselves, it will be possible to elicit from the Secretary of State some further concrete guarantees about the future of these two ports.
I assure the Secretary of State that if it becomes necessary, at some unspecified time in the future, for him to come to the House to ask for a further tranche of public money to fund the scheme in London and Liverpool Labour Members, albeit with a little light banter, will be delighted to support him. Although the support from Tory Benches may melt away, I assure him that, whatever the time of day or night, if jobs at Liverpool, London, or any other port, within the scheme or outside it, are affected, provided that he comes to the House properly to request that money, the Opposition can guarantee not only our support but our presence.

Mr. John McWilliam: I do not intend to keep the House long, but I am somewhat puzzled I have been trying to follow the amendments and compare them with what has happened to Tory Members. I have listened to my hon. Friend the Member for West Bromwich, East (Mr. Snape) with interest, as I always do. As usual, I found his arguments cogent and reasonable. However, I cannot understand why certain Tory Members want to leave out references to the London and Mersey docks. Nor can I understand why they want to leave out clause 2, because if that were put to the vote and carried, the whole scheme would collapse. Nor can I understand where they get the figure of £100 million in the reduction that they propose in amendment No. 5.
It might seem odd that I, as a Member representing a Tyneside constituency, bearing in mind the interest of the Tyneside docks, should be speaking against amendments that would allow more money to come to Tyneside, because that is the import of amendments Nos. 4 and 5, if carried. However, I have a problem. I do not know why the hon. Members who tabled the amendments moved amendment No. 1. I have no clue. They sought to withdraw it before it was moved. If there is a problem with London and Merseyside, they should let the House know what it is. However, we have not had the benefit of the analysis of hon. Members who have tabled the amendment. It was only my hon. Friend the Member for West Bromwich, East who pushed the amendment so that we could discuss this fact. I cannot see any of the hon. Members who tabled the amendments here. Inceecl, I cannot see many Tory Members at all.
It is an abuse of the House to table an amendment, and then abandon it as this one has been. Some of the signatories have made use of the amendment to get a bit of cheap publicity, but where are they tonight to explain its purpose? I deplore the way in which this has been done. It is not within the best traditions or principles of this House for it to be dealt with in this way. I should dearly like to know what was in the minds of those Conservative Members who laid this amendment. They might have had a point which some Opposition Members would have been able to understand. We have not been given the opportunity to hear their argument since they have chosen to abandon it.
12.15 am
I hope that the amendment will not be pushed to a vote. If it is, I fear that, since no arguments have been advanced in its favour, it will suffer the fate that it so richly deserves.

Question put, That the amendment be made:—

The House divided: Ayes Nil, Noes 74.

Question accordingly negatived

Mr. Ridley: I beg to move, That the Bill be now read the Third time.

Mr. Snape: The House will be grateful to the right hon. Gentleman for that little burst of oratory, even at this time of the morning. Of course, it would be remiss of us to allow the Bill to pass without a few comments.
If anything illustrates the weakness of the leave-it-to-the-market view, it is the Bill. We are debating the disbursement of about £500 million of public money. It is a somewhat poignant figure, because it is about the same amount as the country spends on subsidising buses each year. To save £500 million of subsidy for buses, the right hon. Gentleman has spent considerable time in Committee, and provoked considerable political controversy from one end of the country to the other. Yet here we are debating the Third Reading of a Bill that involves the same amount of money, and on which the right hon. Gentleman has resisted amendments from his hon. Friends who sought to reduce that £500 million to what they considered to be a more reasonable figure. That is a somewhat unusual, if not invidious position, for the right hon. Gentleman. It is the result of the lack of an overall ports policy since the Government were elected in 1979. Indeed, the cynic would say that the lack of policy on ports has bedevilled the Conservative party since the early 1970s.
If the right hon. Gentleman's hon. Friends will not put these pointed questions, it is for us to do so. Although we agree with the expenditure of public money on ports, we feel that we have a duty to discharge. We must ask the relevant question about expenditure. The first and obvious question is whether the right hon. Gentleman will return next year, or even before, and say that the Government have been blown off course, things have gone wrong in the ports industry and there will be even more redundancies. Will he ask for an even greater amount of public money for that area? In short, will he be back again next year seeking to chuck even more money at that deep-rooted and, in many ways, grave problem of redundancies and the future of dockers and port workers throughout the country, but especially at the scheme ports?

Mr. McWilliam: I do not wish to imply that I am in any way opposed to the Bill, because I am not. Will my hon. Friend put another question to the right hon. Gentleman? Does he still believe in competition?

Mr. Snape: Valid though that intervention is, I have some other questions to put to the right hon. Gentleman. I hope to elicit some answers from him. I might even start answering for the right hon. Gentleman the question that my hon. Friend has put. I am sure the right hon. Gentleman agrees with competition, like many of his predecessors in that office. Under a Conservative Government he stumps the country advocating the principles of captialism and competition, if that is not a contradiction. Occasionally reality must intrude and it is necessary for him to don his other hat as Secretary of State and say to the House of Commons, "Capitalism is not working and it is necessary to find some public money to assist those in the scheme ports who regrettably have to be made redundant"—I am using his words even though one cannot see the bubble emanating from his mouth. He may say, "Regrettably it is necessary to persuade even


more dockers to leave the industry. Therefore, I must come before the House of Commons to ask for a further transfer of public money."
Conservatism is a strange policy and philosophy. As we can see from the legislation proposed by a Conservative Government, it does not work. It is strange policy for an avowedly Right-wing Secretary of State to come to the House to ask for this £500 million and to say that basically most of this money is intended as a loan against the redundancy pay of dockers in various scheme ports. Although he may not say so, we know that the burden of maintaining those dockers and their families will remain with the state because, once they have been made redundant, they will become eligible for state benefits. We shall pay twice. It is a strange form of capitalism although I am used to strange forms of capitalism emerging from the lips of the right hon. Gentleman.

Mr. Loyden: Does my hon. Friend agree that we have a degree of sympathy for the Secretary of State? Having served with him on the Committee considering the Dock Work Regulation act 1976, and knowing how vociferously and adamantly he presented the argument against the national dock labour scheme, we now see him doing at least half a U-turn to maintain what were once the two major ports in the country. Probably he was a little afraid of the voices from his own Back Bench tonight that argued constantly for bankrupting the ports of Liverpool and London. I wonder how long the Secretary of State will be able to resist such demands from his Back Benches.

Mr. Snape: My hon. Friend has put his finger on a great dilemma that faces the Secretary of State. When the Conservatives are in opposition the answers are easy. They revert to the policies, philosophies and ideologies of the market place, which lead to some distortions, but by and large when in opposition the Conservative party would say that they work and that any Government interference or attempt to inject public money is to be regretted, if not deplored.
That is the philosophy of the Conservatives when in opposition. When in Government, reality frequently intrudes into that myth and it becomes necessary, even for this Secretary of State, to promote legislation such as this and, no matter how distasteful, to advocate the expenditure of substantial sums of public money.
I cannot answer my hon. Friend's question about how long the right hon. Gentleman will be able to defend the ports of Tilbury and Liverpool from the predators who sit on the Benches behind him. Perhaps the right hon. Gentleman will answer that because it is a justifiable question, because although Conservative Back Benchers failed to pursue their amendments to a Division, they left the House in no doubt about their detestation of a further tranche of public money being directed towards those two ports.
We cannot tell, therefore, for how long the right hon. Gentleman will be able to resist that pressure from his hon. Friends. Indeed, I know not whether he has been under pressure from his former colleagues at the Treasury. After all, one would have thought that the expenditure of £500 million of public money would have been resisted vociferously by Treasury Ministers. Given the right hon. Gentleman's track record, one would have thought that while he might not agree with his former masters at the Treasury, he would have a degree of sympathy for them in their endless pursuit of savings in the public sector.
I like to give the right hon. Gentleman credit when I can. As I said earlier, the need for him to advocate what might be regarded as Socialist policies must be distasteful to him. Tonight he must stand before us and say, "Regrettably, yet again the system has fallen apart and the philosophy of the market place has been found wanting. I have had to knock on the door of the Treasury and ask for £500 million to dispense in the area covered by the Bill." Whatever hon. Members on either side of the House feel about the right hon. Gentleman, we must be touched by the thought of this somewhat sad figure having to go through that exercise.

Mr. McWilliam: Does my hon. Friend consider it strange that while the Secretary of State is proposing to increase from £360 million to £500 million the level of financial assistance, he is, under clauses 3 and 4, seeking to withdraw himself from any real control of the expenditure of that public money? I thought that the Conservatives were keen on accountability.

Mr. Snape: My hon. Friend amply illustrates the incompetence of Ministers in the present Government in relation to the spending of public money. The House has spent a considerable amount of time, and some of us spent a great deal of time in Committee, discussing how money is disbursed by local authorities. Conservative Members left us in no doubt as to their views about that. They believed that some authorities— including, coincidentally, the top-tier authorities of London and Liverpool--were guilty of gross misspending. I think that that is a fair summary of the Conservative view on the Local Government Bill. Yet the expenditure under discussion today is a very imprecise science indeed.
As far back as 1981, the then the Secretary' of State for Transport—the right hon. Member for Sutton Cold field (Mr. Fowler)—was responsible for the Ports (Financial Assistance) Act which empowered the Government to make up to £160 million available to London and Liverpool by way of grant. At that time, the then Secretary of State said that that was the end of the road and that there would be no further advances for those ports.
Within a year, however, the Transport Finance Act 1982 raised that figure to £360 million. Admittedly, there had been a change of Secretary of State. By then, the right hon. Member for Sutton Coldfield had gone on to seek fame if not fortune as Secretary of State for Social Services, but the new Secretary of State for Transport, the right hon. Member for Guildford (Mr. Howell), sang a pretty similar tune. On that occasion, too, the House was assured that that amount would suffice for the scheme.
Whatever one's view of the characters of the two previous Secretaries of State, one would have thought that from a purely monetarist standpoint their diligence and desire to reduce public expenditure would be vastly exceeded by the hard Right-wing monetarist views of the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley). Yet within three years he has sought to increase the £360 million, which his predecessor assured us was the final payment, to a new limit of £500 million? When it comes to talking about money, one just cannot trust anyone in the Government nowadays.

Mr. Allan Roberts: Does my hon. Friend agree that because the Government keep upping the ante many dockers will not accept this as a final figure either? Does he agree that they are likely to wait for the next round


of increases in the hope that more money will be available rather than accept what is now on offer, especially as taxi rounds and shops which eventually go bankrupt cost more and more on Merseyside?

Mr. Snape: My hon. Friend illustrates the scale of the dilemma in which the Government now find themselves. Lacking any national ports plan, the Government have spent years trying to bribe dockers and registered port workers to take redundancy, with the result that people in London and Liverpool especially do not believe that this is the end of the road, and who can blame them? Given the deplorable lack of consistency shown by successive Ministers in a Right-wing Conservative Government the average docker in London or Liverpool is most unlikely to say, "Well, this is it, lads—we had better take the money and run because this time they really mean it." The House deserves some assurances from the Secretary of State that this really is his last demand for more public money to be spent in this way — although of course, Labour Members are the first to agree that if it is necessary for people to lose their jobs under the scheme it is right that they should be compensated.

Mr. Roberts: Are the Government aware of the law of diminishing returns? There is a limit to the number of taxi drivers who can drive unemployed dockers, to the number of those who take redundancy money and buy shops to serve the unemployed who have only their redundancy money and to the number who can take redundancy money and run public houses to serve those who are living on redundancy money. Unemployment levels are such on Merseyside that if someone takes redundancy money he will be unable to buy a business to which any customers will come.

Mr. Snape: My hon. Friend has underestimated the ingenuity of the Secretary of State. For all my hon. Friend's ingenuity, he has failed to recognise an area in which those who have accepted redundancy payments can invest their money. The Government have introduced a Bill to save the £500 million of public money that we shall spend under the Bill. Under the Transport Bill, it will be possible for redundant dockers, provided that they have sufficient money, to buy a bus and operate a bus service. They will be able to cater for redundant dockers in pubs. Others will be able to drive redundant dockers in taxis. They will be able to drive redundant dockers in their search for new small businesses, or for work that does not exist, in buses that they have purchased with the lump sums available under the Bill. They will be free to apply for licences and obtain them under the terms of another piece of legislation for which the Secretary of State is responsible and to which I do not wish to refer in any detail this evening.
There is a lack of national direction. If we had not had a general election in 1983, the Labour Government would have created a national docks authority. That would have provided us with the opportunity sensibly to organise capacity throughout the ports. Under this Government we have a system whereby non-scheme ports are encouraged to proliferate and scheme ports are undermined because of a lack of central policy. Under the terms of the Bill, millions of pounds of public money will be disbursed in redundancy payments while millions of pounds from the

same source are being expended on infrastructure, including roads to non-scheme ports. The Secretary of State is known if not loved for his eccentricity, but even against that background the Government are pursuing a strange and expensive philosophy. They choose to pay off those who work in scheme ports while spending as much money in improving the infrastructure of the non-scheme ports and building them up.
The philosophy of the Secretary of State is to up the subsidies and scrap controls, which leaves us with the worst of both worlds. Perhaps that is a fitting commentary on the right hon. Gentleman's attempts to ruin public tranport industries since the unfortunate date when he was appointed Secretary of State for Transport.

Mr. Loyden: My hon. Friend will recognise that besides the medicine that is being offered for the scheme ports there is a poisoned chalice in clause 6, which will give virtually a free hand to the non-scheme ports to develop and extend their activities. That will be done only at the expense of scheme ports. The haemorrhaging of the scheme ports will continue as a result of clause 6.

Mr. Snape: That was the point that I was seeking to make. Public money is being devoted to building up the non-scheme ports while at the same time we are being forced by the Bill to stump up public money towards the redundancy payments of those employed in the scheme ports.
We are not merely discussing Liverpool and London, however important are those ports and their preservation. There are problems throughout the scheme ports. Cries of anguish and pleas for help are aimed at the Government. May I refer the right hon. Gentleman to the Tuesday 7 May issue of the Journal of Commerce and Freighting World, which is not an especially Left-wing newspaper? Under the headline:
State aid plea for River Clyde
the article said that a plea for Government assistance for funding maintenance dredging of the river Clyde in a bid to safeguard jobs in local industries had been made by the port boss. In his statement in the Clyde Port Authority's annual report, its Chairman Robert Easton was reported as saying that the cost of dredging in relation to the diminished level of trade in Glasgow continued to cause concern. He was said to be firmly of the view that central Government should directly contribute to that cost. I do not know whether the right hon. Gentleman agrees with that view, but it is one that is common throughout the scheme ports. If that plea for assistance to dredge the river Clyde is not answered there will be a further decline of the Clyde and no doubt that decline will be accelerated by the policy of moving containerised traffic from Scotland to ports such as Felixstowe.
As long as we have that illogical "hands off the non-scheme ports" approach by the Government, too much container capacity, and an apparent desire by the Government to create more container capacity outside the scheme ports, the right hon. Gentleman will presumably continue to come before the House year after year to beg for a further injection of public funds. The "pay up and hands off' approach contained in the Bill typifies the right hon. Gentleman's all too often muddled philosophy.
As I tried to show when I described the problems faced by the river Clyde, playing off a scheme port such as the Clyde against a non-scheme port such as Felixstowe


merely involves the nation in the expenditure of a great deal of public money. It does nothing for any coherent ports plan or to boost the prospects for the British economy. The right hon. Gentleman cannot have it both ways. Are we to have a national ports policy or are we to have Secretaries of State for Transport continually coming to the House to say, "The policies of the past 12 months have not worked. We must seek another cash injection."? The Secretary of State should devote his reply to those points. No hon. Member would wish to see the right hon. Gentleman next year again under attack by his colleagues and again seeking the protection of those of us in the Opposition who happen to be interested in the preservation of jobs and the creation of a national ports council.
It is fortunate that those Conservative Members who made such warlike noises a couple of hours ago proved to have more wind than stamina, because it could have been embarrassing for the Secretary of State had some of us on the Opposition side of the Chamber not been around to protect him.
We do not oppose the Bill. Regrettably, it is necessary. We warn the Government that there is no point in saying day after day that public expenditure is inherently wicked when they are creating increased public expenditure by not having a national policy or by having, in some cases, ill-thought-out competition between ports in certain categories. The Secretary of State has been fortunate so far in receiving the support of Labour Members, but, unless he is more persuasive, he might have a great deal of difficulty in persuading his colleagues about the necessity for similar legislation.

Mr. Simon Hughes: As I said on Second Reading, I do not oppose the Bill. My reason is encapsulated in the comments that I would have made on Report. if I had intervened, during the contribution of the hon. Member for Southampton, Itchen (Mr. Chope). It would have been folly for a series of Governments to invest in an attempt to restructure the port industry —specifically specifically London, but also Merseyside — and then suddenly find, when there was a prospect of everything coming to life again, that the taps were turned off so that industry fell flat as an investment. That would have wasted the investment of years.
Not many weeks ago the House passed a Bill which was equally related to financing England's dockland areas the New Towns and Urban Development Corporations Bill. We substantially increased the amounts of money that the urban development corporations in London and Liverpool docks were to receive—to £400 million and £800 million respectively. On Second Reading, the Secretary of State and the Under-Secretary of State said that the ceiling of financial assistance provided in the Bill was necessary because a promise was given and a scheme was established. As more and more people leave the dock labour scheme they have to be paid at the same rate as they were led to believe they would always be paid. One cannot break one's word nine tenths of the way through a deal. The increased provisions should be used to provide a regeneration in the ports which, because of their differing histories and circumstances, need the industry and are suitable in many ways for the necessary adaptation to the technological revolution. We cannot go back to the old style of port or trade. Trade has moved on, and we accept that. I have to ask the Secretary of State, as I asked his

colleague on Second Reading, whether we can get more than just the gleam of hope or glimpse of the vision referred to in reply to the questions that I raised on Second Reading. We need some clear and decisive answers as to how we bring hack the trade to the ports and up the rivers, particularly in this, our capital city.
It would be ludicrous if we did not seek to use the moneys that the Bill and the New Towns and Urban Development Corporations Act of this year provide by way of borrowing and funding to maximise what must be a great opportunity in the new containerised trade for either the port of London or part of the river further down the estuary, and capture trade from our competitors elsewhere. It is not trade that we need take from other ports on the east or west coast, but trade that we can take from ports on the other side of the North sea and the English Channel, to which we have been losing trade for a variety of reasons.
There are specific questions related to increasing the advantages for the private wharves as well as wharves that remain in my part of London, nearest to the Pool of London. They should be considered positively and urgently by the Government. I have not decried the ideas that have emerged since 1981, when the development corporation was set up. It is one of the areas that could produce something. It has not done so yet. I ask the Secretary of State and his colleagues to see to it that they continue their obligation, which they and previous Governments undertook to uphold, to the mass of' people who put their backs, years and lives into building up and sustaining our port industry through the blitz as well as times of peace. Those people now have to be relocated elsewhere, and a commitment is made to them in the Bill.
However, we need more than just a commitment to pay off those people; we need a commitment that the moneys that the Government invest will be invested to provide jobs anew for people with skills and the willingness to contribute to the rebuilding of industry in the areas now deserted by the industry that they knew and to which they wanted to contribute.
I look to the Government to do more in seeking ways to do that. I am sure that colleagues from other parties as well as mine will say that Merseyside needs help. Both Liverpool and London need continued incentives for employment, using the enormous skills that the people have.

Mr. Loyden: The hon. Gentleman raises an important point, which is relevant to the Bill. Had alternative employment and training been available in the ports of London and Liverpool, the transition from the old method of dock working to the new technology would have been virtually painless, and would have been embraced by the people who worked in those ports. Sadly, that was not so. It has been a painful experience.

Mr. Hughes: I accept that entirely. In many ways, it is almost too late. However, it is just not quite too late.
I should like to end with this sombre warning. In London and Liverpool we have relied in large measure on transport for our jobs— not just in the docks, bur. in related industries, such as haulage and the warehousing that relates the two. Not only have we lost the industry from the ports and the docks in areas of London such as mine, as well as in Merseyside, but a substantial part of the remaining related transport industries is being pulled


away from us. Perhaps it is good for the silicon vallleys, the M25s and some employers that the haulage industries move away. But we cannot have the transport industries drained from us without having something to substitute.
I ask that the Secretary of State for Transport perceives more clearly the need for transport industries still to play a major role in the British economy. They have always been important. If we lose that sector of industry, we shall lose something which, in all probability, we shall not recover. It would mean not only many lost jobs but an enormous amount of lost opportunities for those who now have skills, and who are willing to learn and adapt those skills to apply them to our nation's wealth in the years and decades ahead.

Mr. Ridley: The hon. Member for West Bromwich, East (Mr. Snape) has not done his homework on the Bill. He said that it provides for £500 million. It does not. It is £150 million, not £500 million of new money, increasable by order to £180 million. He has missed the first and most elementary point about the Bill.
The hon. Gentleman also said that the Transport Bill is intended to save money. He obviously has not read that Bill either. There are no financial clauses in that Bill with such an effect. Its purpose is to improve the use of money that is spent.
The hon. Gentleman said that the Bill enables loans to be made to various dock undertakings. Again I must correct him; it makes grants. He said that a docker who lost his job as a result, sadly, of redundancy immediately went on social security. People with £25,000 of capital are not eligible for social security. That is the extent of the hon. Gentleman's knowledge of the subjects about which he wasted a considerable amount of the House's time today.

Mr. Snape: In the interests of accuracy—

Mr. Ridley: I have not given way. I shall be delighted to give way to the hon. Gentleman, but I shall do so when I feel like it, not when he feels like it.

Mr. Snape: I am grateful to the right hon. Gentleman, even though he was a little churlish. I think that I said that someone who was made redundant went on the dole.

Mr. Ridley: The hon. Gentleman did not say that.

Mr. Snape: That is the phrase that I meant to use.

Mr. Ridley: The hon. Gentleman did not use it.

Mr. Snape: In that case I hope that the right hon. Gentleman will accept that that is the phrase that I meant to use and that is the context in which I meant to—

Mr. Ridley: rose —

Mr. Snape: I have not finished yet. It is difficult to convince the right hon. Gentleman about this appalling legislation, but if I have to tell him about the elementary etiquette of the House we may be here for a long time.

Mr. Ridley: rose —

Mr. Snape: The right hon. Gentleman cannot cease to give way. I am not trying to make another speech. I am merely asking the right hon. Gentleman to accept the accuracy of the correction that I have mentioned. I hope that he will do so.

Mr. Ridley: It is nice to hear the hon. Gentleman grovelling I imagine that he could not read the writing of his superior, the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), who clearly had written his speech. I am sorry that her writing is so bad that he cannot get his facts right when he is brought in for a Bill at, I admit, very short notice. This is the first time that the hon. Gentleman has had anything to do with the Bill, as is clear from his performance.
I shall not come back to the House next year for a further Bill such as this. I have no difficulty in persuading my hon. Friends who voted for the Second Reading and who will vote for the Third Reading if so required and did not vote for the amendments. Only the hon. Gentleman called for Divisions on the amendments. I am in no trouble, but it seems that the hon. Gentleman might be because he could not get anyone to vote when he called a Division. Any support that the hon. Gentleman might have in his party has not been in evidence tonight.

Mr. McWilliam: Perhaps the right hon. Gentleman has noticed that the amendments on which my hon. Friend called a Division were signed by Conservative Members, with the exception of one hon. Lady.

Mr. Snape: And that was a mistake.

Mr. McWilliam: We called a Division to enable Conservative Members who might have felt that they had a problem with the Bill to record that problem. Their failure to do so is a matter for them, not for my hon. Friend.

Mr. Deputy Speaker (Sir Paul Dean): Order. I hope that we shall not hark back to amendments which we have already discussed. We are now on Third Reading.

Mr. Ridley: I was also hoping that. If we are to discuss who put their name on the Order Paper, including the hon. Lady for the unpronounceable valley, we may get into considerable trouble. Most of the right hon. and hon. Gentlemen who put their names to the blocking motion on Third Reading are not present. I assume that their names are there by mistake. May I withdraw the names of the Leader of the Opposition, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) and so on because I have it on good authority that they did not mean to put their names to the motion? Anyone can play at that game.
The hon. Members for Liverpool. Garston (Mr. Loyden) and for West Bromwich, East said that a ports policy would make life difficult both until now and in future. When the Labour Government were in power from 1974 to 1979 there were 57 applications for investment permission under the Harbours Act 1964. They turned down two of them, one of which was simply for a fishing boat harbour and required 85 per cent. subsidy, and the other 55 were accepted. The net effect of their having the powers, which they now regret losing, was to stop one harbour development, thereby preventing a few people from getting jobs. That is a planned ports policy, as administered by a Labour Government during five years of office. The net result was to prevent jobs from being created at one port. Therefore, I simply do not know what is the point of the hon. Gentleman's criticism of the Government's port policy.

Mr. Loyden: rose —

Mr. Ridley: I give way for the last time.

Mr. Loyden: Does the Secretary of State agree that the important point was the limit on the sums that could be spent, which prohibited ports from making a major development? Most of that money was used for capital equipment rather than for the extension of the ports.

Mr. Ridley: The Act provided that investments above a certain size had to be approved. The only way in which the powers can be used is by not approving those investments, thereby reducing port developments and the number of jobs created. If the Labour party thinks that a negative control of that sort will solve the problems with which we are grappling in the ports industry, it must think again.
The hon. Member for Southwark and Bermondsey (Mr. Hughes) regretted, as does the Labour party, the fact that trade changes. It changes for 100 different reasons. It changes principally for technological reasons, but also for reasons of trade, geography, and the alteration of the type of business carried by ships. Obviously it is sad and regrettable when trade leaves a port. However, it is almost inevitable that it will move from the pool of London and narrow river harbours of the sort that front the hon. Gentleman's constituency. It is not good enough to say that somehow the Government must bring back trade, especially to Bermondsey and Southwark. It is hopeless and unrealistic to suggest that, on Third Reading and wholly out of order, I can announce a policy to bring back trade, which may have vanished 50 years ago from wharves in the hon. Gentleman's constituency. That may be good vote winning stuff, but the hon. Gentleman must do better than that.

Mr. Simon Hughes: rose —

Mr. Ridley: No. I said that I would not give way again.
I remind the hon. Gentleman that, through flexibility, competition and private capital, we have seen the growth of continental ports such as Rotterdam and Antwerp. That has not happened because of a planned ports policy or nationalised state capital. It has not happened because of wishing that the Government would bring back the trade. It has happened because a long time ago those countries followed policies similar to those of the present British Government.
Rotterdam probably handles as much trade as all the United Kingdom ports put together, and it employs 4,100 dockers. Britain still employs 12,000 registered dockers. That is why we need the Bill, and I hope that the House will give it a Third Reading.
Question put and agreed to.
Bill read the Third time, and passed.

South-East Asia (Refugees)

Motion made, and Question proposed, That this House do now adjourn.—[Mr Mather.]

Mr. Keith Best: During the past few days, most of us have participated in celebrations to mark the 40th anniversary of VE day. Less well publicised is the 10th anniversary of the fall of Saigon, which happened only two years after American troops pulled out. The effect of that is with us today. The withdrawal from Vietnam tilted American foreign policy off balance and seriously undermined the self-confidence of the most powerful nation in the world, in addition to bringing tragedy to the families of the dead and injured American conscripts, the average age of whom, as the current best-selling pop record tells us, was 19.
The shadow of Vietnam hangs like a pall over the United States' intervention in other countries and colours moral judgment in a comparison, however inappropriate, with Soviet intervention in Afghanistan.
The misery and convulsion of south-east Asia continues and, occasionally, is brought home to people in the western world through a haunting picture such as that in The Times yesterday of a Vietnamese child with longing eyes peering through the wire fence of a closed refugee centre in Hong Kong.
Anyone who has seen the current factual film "The Killing Fields" about the excesses of the Pol Pot Khmer Rouge regime in Cambodia should realise that such things are still going on in south-east Asia today.
In Vietnam today there is a policy of tyranny and oppression towards those who had anything to do with the Saigon Government. Thousands of people are in the so-called re-education camps — a synonym for concentration camps. I spoke recently with a person who had finally escaped from one such camp after three years. His fellow escapees had been shot in the attempt. He told of a daily regime which involved working in the fields for almost 12 hours, followed by two hours intensive political indoctrination by camp leaders who were not qualified teachers. Individuals are required to learn parrot fashion everything they are taught, are tested every three weeks and are required to go over it again and again until it is well conned. The only newspaper available is the organ of the party.
About 3,000 people were in his camp alone, divided into units of 10, of whom two remain to prepare meals while the other eight go to work in the fields, still having to do the work of all 10. No communication between groups is allowed and individuals are permitted to send one censored letter and receive one food parcel every three months. Only goods for immediate consumption can be received, and nothing can be stored. The people must grow their own food, but most is taken by the Government.
The misery is unendurable for many. There are several suicides. I was told of a man who hanged himself from a low beam in the hut by holding his legs off the floor until he was past saving.
The result of such oppression has made Vietnam an international pariah, and has led to a massive exodus of her people. First the ethnic Chinese came, but now the refugees arriving in Hong Kong are 98 per cent. ethnic Vietnamese. They have come in whatever way they can to escape the tyranny of their country. It is difficult for us


to imagine the sense of despair which leads to such a flood of humanity and which drives people to leave home, family, possessions and familiar surroundings and to commit themselves to the uncertainty of becoming refugees. Thousands who trusted themselves to small boats perished at the hands of the cruel sea or pirates. Yet still they come.
We have a moral duty to use every way open to us to get Vietnam not only to change its internal policies towards its citizens, but to enable those who have difficulty in obtaining exit visas, many of which must be paid for dearly through corrupt officials, to leave their country under the orderly departure programme. The British Committee for Refugees from Vietnam, Laos and Cambodia, of which I have the privilege to be the chairman, has obtained permission from the royal borough of Kensington and Chelsea to erect on the banks of the Thames in London a telling memorial to those who perished at sea in the search for freedom. It will be a statue of a mother holding a baby emerging from the waves. We are raising funds for it now. It will be a constant reminder to us all that the price of freedom can be life itself.
In January, I visited Hong Kong and went to see refugees in Chi Ma Wan closed centre, Kai Tak transit centre and the Jubilee camp. The Hong Kong Government have coped remarkably well and with great endeavour and skill with well over 100,000 Vietnamese refugees who have arrived in a community which has a population density of 4,972 persons per sq km, which compares with 230 in the United Kingdom and 22 in the United States of America. In the last financial year, the Hong Kong Government spent about 100 million Hong Kong dollars, of which the United Nations High Commissioner for Refugees provided about 20 million Hong Kong dollars. Many of them have been resettled in Western countries following the Geneva conference in July 1979. I am pleased that the British Government took a leading role in that conference and agreed to take a quota of 10,000. We now have about 19,000 Vietnamese refugees in the United Kingdom.
However, as at 1 December 1984 there still remained 12,258 Vietnamese refugees in Hong Kong, although I understand that that figure has subsequently decreased. Hong Kong has already assimilated many refugees in its community, but there is now a need for further international response to help to clear this human log-jam. Mr. Paul Hartling the United Nations High Commissioner for Refugees, is in Hong Kong and now has called on the United Kingdom to take a few hundred more Vietnamese refugees from Hong Kong.
A similar plea has been made in the excellent and comprehensive report of Vietnamese refugees, produced by the Select Committee on Home Affairs. We eagerly await the Government response.
In giving evidence to the Select Committee, my hon. Friend the Minister of State, Foreign and Commonwealth Office, said:
It is our responsibility to take the lead, as the Department in the Government responsible for Hong Kong, and to try to find a solution to it.
He agreed that
it must be a priority in terms of our responsibilities".

I understand the view of the Home Office that there is no positive evidence that other countries would follow suit in taking more refugees, but no country is likely to give an undertaking in advance of any proposals by Britain.
There is strong evidence to suggest that such a lead would be imitated by other countries. Canada has recently announced that it will take more refugees. In any event, it is worth while our doing so. The numbers are small. We took only 88 people from Hong Kong last year. Those refugees in Hong Kong with close family relatives in the United Kingdom number no more than 434, or 112 cases, on figures given to me when I visited Hong Kong. It is because these refugees have family links with the United Kingdom that no other country will have them. If we do not take them, they will be condemned to remain in Hong Kong camps indefinitely.
What does that mean? Chi Ma Wan is a prison camp. The refugees there are "behind barbed wire", the phrase that forms the title of the policy statement issued by the British Refugee Council in December 1984. I was greatly impressed by the standards of cleanliness and hygiene, the quality and variety of the food and the excellent medical attention. I asked the resident doctor, who was English and had lived in Vietnam for a time, whether she was short of any supplies, and she said that she was not. However, the fact remains that these people cannot go outside the camp, unlike their fellow refugees, and sometimes relatives, in the open camps, who can go outside and work in the Hong Kong community. There were 2,502 in Chi Ma Wan when I was there, mainly aged 15 to 30, 73 of them under six months old. Some 90 had been born in the camp in 1984. About 100 are going on to resettlement in the United States, Canada and Australia.
Some 300 to 400 have been there since the closed camp policy was started in July 1982 to deter further refugees from coming. These tend to be the most uneducated of the single young males. They are unlikely to be accepted by any country and will have to be assisted into Hong Kong society if no other country takes them in. In Kai Tak, I was told that 60 per cent. had not been taken because they refused a previous offer of resettlement because they were ill or had a criminal record. I have never been satisfied that the closed camp policy acted as a deterrent. In any event, if it ever did, its raison d'etre has disappeared. The numbers of refugees coming to Hong Kong have dropped off, not just as a result of the closed camp policy. The numbers were dropping off before July 1982, as the British Refugee Council has pointed out.
It is true that there was a quite dramatic diminution in numbers about that time, which has continued. However, it flies in the face of common sense to suggest that those who are prepared to risk losing everything, including their lives, in escaping from tyranny, are likely to be deterred by the thought that they would be incarcerated for a time in a closed camp. Natural optimism would entitle potential refugees to think that the period in such a camp would not be too long, even if they were also to discover the facts.
In conjunction with the Select Committee on Home Affairs, I ask my hon. Friend the Minister to persuade the Hong Kong Government to phase out closed camps as soon as possible and allow the inmates to work in the community. I accept that our moral position of persuasion will be weak if we do not accept the fewer than 500 refugees whom I have mentioned, and if there is not a rolling programme of acceptances over a period to assuage the fears of the Hong Kong people that 12,000 refugees,


speaking a different language and with a different culture, will no be integrated into Hong Kong society once they are able to work in it pending resettlement. The resettlement must be assumed.
There is one matter to do with the closed camps which the Hong Kong Government can remedy immediately. From my talks with Government officials there, I am optimistic that the Government are on the verge of a change and need just a gentle push from my hon. Friend the Minister of State. That change would be to allow refugees in closed camps to join their spouses in open ones. One woman I met in Chi Ma Wan had been there with her two children for two years unable to join her husband who was living in an open camp and working. This is inhumane. It is no good suggesting that those in open camps can give up work and join spouses in closed ones. Realistically, the concession must be the other way round.
Since May 1981, Vietnamese refugees settled here have had applied to them the same criteria as for other citizens for family reunion—that they can be joined by minors under the age of 18 and spouses but not by others, unless they are elderly dependants or there are compassionate grounds. Unaccompanied minors, for example, do not qualify to have families join them. Refugee agencies give a much broader definition of close relatives, as we did before 1981. I believe that my hon. and learned Friend the Minister of State, Home Office does the best he can, but I urge the Government to give a broader interpretation. I should like to know whether other recipient countries adopt similar restrictive criteria.
More needs to be done, but they are matters mainly for my hon. and learned Friend the Minister of State, Home Office, so I shall not deal with them in detail now. I believe that we now need to concentrate assistance on those areas in which Vietnamese refugees settled here have congregated following the disastrous initial dispersal policy. If it is right for other ethnic minorities, it is certainly right for this industrious and decent people, for whose character and ability to adapt I have the highest regard. I urge the Department of Health and Social Security to look carefully at the effect on insecure refugees of the board and lodging regulations and to exempt refugees if the regulations work unfairly against them. We owe a duty to all our citizens, including those from overseas who enrich our society. Many such points were raised last Thursday during an Adjournment debate by the hon. Member for Hammersmith (Mr. Soley), who has apologised to me for not being able to be here tonight.
The situation in south-east Asia has been destabilised by the occupation of, first, Laos and then Cambodia by Vietnam, which has the third or fourth largest standing army in the world. One hundred and fifty thousand Vietnamese troops are stationed in Cambodia, and after the recent offensive which pushed into Thailand the forces of the coalition Government of Democratic Kampuchea, a Soviet-backed communist regime's forces now lap up against the border. There are 250,000 Cambodian refugees within Thailand and I ask my hon. Friend the Minister of State, Foreign and Commonwealth Office whether he does not think it necessary for further international action to be taken to deal with this massive problem.
The United States is deeply concerned not just about any possible further aggression against Thailand and compromise of its territorial integrity which would involve American troops once more in south-east Asia but also

about the refugee problem, which is insupportable for Thailand. That country has just persuaded the United States that it must have F16 fighters. All around, the countries of south-east Asia are arming. The situation is critical.
Personally I doubt whether Vietnamese adventurism would risk a major conflagration, but the danger must be met. After its considerable losses in the abortive action against the northern part of Vietnam in 1979, China is unlikely to try to force the issue militarily, although it will continue to support the coalition Government, in particular the brutal Khmer Rouge.
Cambodia is going through an agony. There is an active policy by the invaders of Vietnamisation, particularly in the schools, and an attempt to suppress Cambodian culture, as well as reported atrocities. However welcome the Vietnamese may have been in 1979 rescuing the Cambodians from the loathsome Khmer Rouge regime of Pol Pot, they have now become unwelcome oppressors, condemned by the United Nations and the international community. It has been said that, as long as the Khmer Rouge cast their shadow over the country, the Vietnamese are likely to remain and the people of Kampuchea will be glad of their protection. That is open to question, but the Khmer Rouge are no friends of democracy.
Of the two other members of the coalition, Son Sann is presently too weak, though perhaps the most favoured by the west. We must look to Prince Norodom Sihanouk, who is the key to a resolution of the problem and who may be able to establish a genuinely neutral Cambodia. This might persuade the Vietnamese, with much pen-illa fighting ahead of them otherwise and continuing international criticism, to withdraw if they could be satisfied that Cambodia would not be a threat on their borders. Prince Sihanouk has a home in Peking and could well be acceptable to the Chinese but act as a buffer against any thoughts of extension of influence from that quarter which would be met with concern by Indonesia.
There is no easy solution, and one is still a long way off, as acknowledged by Senor Perez de Cuellar. Yet a time bomb is ticking away in south-east Asia which could threaten world peace. It is for that reason that Great Britain has a vested interest in seeking a workable solution along with other nations that wish to save a brave and deserving people from suffering.

The Minister of State, Foreign and Commonwealth Office (Mr. Richard Luce): I congratulate my hon. Friend the Member for Ynys Môn (Mr. Best) on raising in this Adjournment debate the subject of the crisis in south-east Asia and the refugee problem. He addressed it with the greatest thoroughness and has shown that he has not only a great interest in the problem but a very great knowledge of it. He spoke with great feeling. He is the chairman of the British Committee for Refugees from Vietnam, Laos and Cambodia of the British Refugee Council and does a great deal of very important work in that area. I am glad too that my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) is present because he takes a close interest in the affairs of refugees, and of Vietnamese refugees, particularly in Hong Kong, and has been active in the Select Committee that has been 'coking into these matters.
My hon. Friend the Member for Ynys Môn is absolutely right in drawing attention to the root cause of the whole


problem of Vietnamese refugees. It lies, as he said, in Hanoi. The oppressive foreign and domestic policies of the Vietnamese Government have led to economic priorities whereby disproportionate resources are devoted to maintaining the third largest army in the world. This, combined with a lamentable human rights record, has resulted in a continuing exodus of large numbers of Vietnamese — around one million since 1975. These people flee their country in search of a better life. Last year a further 25,000 fled by boat, risking dangers at sea, including piracy. I think that these figures in themselves are a massive condemnation of the policies of the Vietnam Government.
Many thousands of Vietnamese have been detained since 1975 in the so-called re-education camps of Vietnam without charge or trial. They continue to be subjected to exceptionally harsh treatment, and deprived of food and medicine. We are similarly disturbed by the continuing detention without trial or charge of intellectuals, diplomats and writers, for example, who have expressed views even marginally different from the official party line, by the discriminatory attitude of the Vietnamese Government towards Chinese and other ethnic minorities in Vietnam, and by the persecution and harassment of Catholics and Buddhists—particularly of Catholic and Buddhist priests —solely because of their faith. We and the international community must continue to try to persuade the Hanoi Government to treat their citizens in a civilised fashion and to take proper responsibility for them. We certainly make this clear whenever we can.
The United Kingdom and Hong Kong, although they have no historic links with Vietnam, have made important contributions in helping to alleviate this human tragedy. As my hon. Friend has already said, some 19,000 Vietnamese have been given new homes in this country, and over 14,000 Indo-Chinese have been resettled in Hong Kong. The 1979 conference on Indo-Chinese refugees was a United Kingdom initiative. Over 12,000 of the refugees who have been resettled in this country have come from Hong Kong. The House should be aware of our continuing international commitment to resettle family reunion and ship rescue cases. Last year alone, we took in 832 Vietnamese in these two categories. Under the orderly departure programme, the Vietnamese continue to join their families here direct from Vietnam.
If I may say a word about Cambodia, a further reason for the crisis in the region has been Vietnam's unwarranted invasion and occupation of Cambodia in 1978. Vietnamese troops totalling 160,000 are still there. Vietnam prides itself on having fought for its own liberation. It should respect the wish of the Cambodian people to determine their own future free from outside interference. But the Vietnamese Government have ignored repeated calls at the United Nations, in the 1981 international conference on Kampuchea and subsequent General Assembly resolutions, for the withdrawal of all foreign forces from Cambodia and the holding of internationally supervised elections for a neutral, non-aligned and independent Cambodia. These principles were re-endorsed at last year's UN General Assembly by an overwhelming majority of 110 countries. Not only have these calls been ignored, but last November Vietnamese forces launched their most ferocious offensive to date on

the Thai-Cambodia border, causing well over 200,000 Cambodians to flee into Thailand with great human hardship.
What is the United Kingdom policy? The British Government have consistently supported these UN calls, and we have condemned the Vietnamese occupation, which is the root cause of the Cambodian refugee problem. We have also called upon the Vietnamese to put a stop to actions such as their repeated offensives and violations of Thai territory, summoning the Vietnamese ambassador to reinforce these views. We shall certainly maintain this pressure.
We play, and intend to continue to play, a full part, in conjunction with our European and other Western partners, in support of the ASEAN nations, who are rightly in the forefront. We maintain the closest contact with them on this and on other matters. Any solution in our view must be based, as ASEAN insists, on withdrawal of the Vietnamese forces from Cambodia. We shall certainly continue to keep in the closest touch with our ASEAN colleagues, as, indeed, my right hon. Friend, the Prime Minister, has done in her recent tour.
We shall continue to support the aims of the resistance coalition whose forces confront Vietnam in Cambodia. Prince Sihanouk and Mr. Son Sann, the leader of the Khmer People's National Liberation Front, play an important role in providing a focus for Cambodians who wish to see their country independent once again. We maintain links with representatives of the Prince and Mr. Son Sann. Indeed, my right hon. and learned Friend had talks with Mr. Son Sann only a year ago. We have provided bilateral humanitarian aid to their two organisations after the attacks by Vietnamese troops on the Thai-Cambodian border.
United Kingdom support for the coalition does not mean support for Pol Pot. We withdrew our formal recognition of the Pol Pot regime in December 1979. Our representative at the 1982 United Nations General Assembly made it quite clear that our support for the credentials of Democratic Kampuchea did not represent a change in the Government's position in this matter, and that we had no intention of contributing to the reestablishment of the Pol Pot regime. It is surely for the people of Cambodia to decide who should represent them. In contributing to international relief on the Thai-Cambodian border we have made it clear to the agencies concerned that our aid must not go to the Khmer Rouge, and we are assured that that commitment is honoured.
I should also refer to our efforts to help Cambodian refugees, a subject of concern to my hon. Friend. Together with other western countries, we co-ordinate our policies closely to try to alleviate this problem. During the financial year 1984–85, we contributed £850,000 to international relief work on the Thai-Cambodian border, and we shall continue to maintain our contacts with the international bodies in the period ahead.
I want to say a word about the important subject of Hong Kong, which is our responsibility. The recent publication of the Select Committee on Home Affairs on refugees and asylum highlighted the problem of Vietnamese refugees, especially those in Hong Kong. That makes the debate most timely. My hon. Friend the Minister of State, Home Office said during an Adjournment debate on 9 May that the Government were considering the Select Committee's recommendations


very carefully, and would be giving a detailed response in due course. In the meantime, it would not be appropriate to offer detailed comment on the recommendations.
I assure the House that the Government attach the utmost importance to improving the position of the Vietnamese who have settled in this country and to finding permanent solutions for the 11,200 who are still in Hong Kong awaiting resettlement.
My hon. Friend referred to the remarks of the United Nations High Commissioner for Refugees, Mr. Hartling —who is now visiting Hong Kong—to the effect that Britain should
take an initiative that would encourage other countries to take more.
I said in my evidence to the sub-committee on race relations and immigration on 4 February that
a clear indication that we are prepared to carry out a resettlement programme, linking it perhaps to special family reunion cases, and that we have very positive proposals and ideas in this connection, could well produce a response.
I believe this to be the position, but there obviously can be no guarantee.
As my hon. Friend the Minister of State said on 9 May, the Government will look at the question of the United Kingdom accepting more refugees, especially family reunion cases, in the context of their consideration of the Select Committee's recommendations. It is, therefore, inappropriate for me to comment in more detail, save to stress that the Government are treating the matter as one of very great importance and urgency.
I wish to praise the contribution already made by other countries towards helping to solve Hong Kong's refugee problem. The United States, Canada and Australia have accepted 55,000, 16,000 and 4,400 refugees respectively from Hong Kong. I am pleased to say that Canada has just announced a decision to take an additional 500 refugees this year from Hong Kong on top of the 600 that it had already agreed to take. That means that this year it will take the same number as last year.
In particular, I must thank the Hong Kong Government and people for what they have done to help the Vietnamese refugees. Since 1975 they have provided temporary asylum for more than 100,000 refugees. In addition, they have themselves absorbed more than 14,000. They have turned none away. It is a remarkable humanitarian achievement for such a small and densely crowded territory.
In regard to the difficult problem of the closed camp, as I said in my evidence to the Select Committee on 4 February, the position of having 5,600 refugees in closed camps and an equal number in open camps—but I refer particularly to the closed camps — is such that no Minister can conceivably say that it is satisfactory, desirable or acceptable. It is not. Nor is it satisfactory or desirable for the Hong Kong Government. We and the Hong Kong Government would like camps to be abolished as soon as possible. But we have to face reality. Hong Kong is one of the most crowded places in the world. The population density is 20 times that in this country. It has received more than 100,000 refugees since 1975. It has enormous immigration presssure simultaneously from

China. It has been difficult for the people of Hong Kong to accept that Chinese, often kith and kin, should be returned to China, while Vietnamese remain in Hong Kong pending resettlement overseas.
I ask my hon. Friend to bear in mind that the evidence shows that, however painful the process of introducing those camps in 1982, it has led to an increase in the decline in the number of people arriving from Vietnam in relation to the number of people who have been going from Vietnam to other countries. The figures for the period from 1981 to 1984 demonstrate clearly that there has been a decrease in the numbers arriving in Hong Kong. In 1983 the arrivals decreased by 53 per cent. but on a regional basis by 36 per cent. In 1984 the Hong Kong arrivals decreased by 39 per cent. and the regional arrivals by 11 per cent.
Those who argue that Hong Kong's refugee burdens were already declining when closed camps were introduced should bear in mind that in July 1982, the month in which Hong Kong changed its policy, arrivals in the territory reached their highest level for three years. More than 1,600 refugees arrived in Hong Kong in a single month. I ask my hon. Friend to bear in mind chat it is terribly important to take these factors into account and to consider the difficult position of the people of Hong Kong.
The Hong Kong Government make every effort to meet the needs of refugees for shelter, food, medical treatrnent, clothing, education, welfare and recreational facilities. In particular, they are devoting considerable attention and resources to improving educational and training oppor-tunities. They seek to provide educational and vocational training, with emphasis on English, in all Government-run centres. In Hei Ling Chau closed centre for the North Vietnamese where the resettlement rate is therefore lowest and potential integration problems greater, the Hong Kong Government intend to provide special multi-purpose training centre, to be funded by United Nations High Commissioner for Refugees and run by the World Relief voluntary agency. We all hope that will help.
In particular, my hon. Friend referred to the segregation of husbands and wives. That is one of the most difficult and humane problems that one has to deal with. The problem is that if we allow people from closed camps to join their spouses in open camps there is a serious danger of abuse of the system which must be taken into account. In the meantime, there have been 50 applications for reunion in closed centres; 37 of them have been approved. I shall consider very carefully the recommendation that my hon. Friend has made.
Again, I thank my hon. Friend for raising this important issue. Our objective is to seek durable solutions to these painful problems. In looking to the future, we believe that in the long term the ideal goal is to create conditions in which refugees will want to return to their countries of origin of their own free will. They must not be denied that aspiration.

Question put and agreed to.

Adjourned accordingly at sixteen minutes to Two o' clock.